Question

1. What is the opportunity cost associated with having a worker wander across the factory floor from task to task or in search of tools and parts?

2. Explain how lean manufacturing improves the economy’s efficiency in allocation.

3. Before lean manufacturing innovations, Japan mostly sold consumer electronics to the United States. How did lean manufacturing innovations alter Japan’s comparative advantage vis-à-vis the United States?

4. Predict how the shift in the location of Toyota’s production from Japan to the United States is likely to alter the pattern of comparative advantage in auto making between the two countries.

Answer 1

1. Opportunity cost is the next best alternative foregone. Generally ij factories are aligned with division of labor. It will lead to specialisation also and will increase production and productivity both.

When worker has to wander across the factory floor, then lost output is an opportunity cost as output will be less.