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A. Consider Australia and Japan which can both produce Liquified Natural Gas (LNG) or passenger vehicles. In a year. Australi

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Answer #1
Australia Japan
Passenger vehicles 2 6
LNG 80 120

i. Japan has a comparative advantage in producing passenger vehicles. It is 3 times better than Australia in passenger vehicles (6/2=3) and 1.5 times better in LNG (120/80=1.5).

ii. Australia can either produce 40 billion tonnes of LNG or 1 passenger vehicle (dividing both production by 2). Thus the minimum number of cars it will accept is 1. Japan can either produce 40 billion tonnes of LNG or 2 cars (dividing both production by 3). Thus the maximum number of cars it will pay is 2.

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