Answer to Question #156701 in Economics of Enterprise for yoo

Question

 Logically the change in the price of carbon based energy will affect imports and exports between the US and China. China has five of the global top six businesses producing solar panels, and the US is the largest producer of new, fuel efficient commercial airplanes in the world (and Boeing’s 737 Max has been cleared to fly). 

1. If we imagine that these are the only two products and the US and China are the only two countries, use the concept of comparative advantage to explain how the US and China could benefit from trading airplanes and solar panels?

Answer 1

If we imagine that these are the only two products and the US and China are the only two countries, then according to the concept of comparative advantage US should produce airplanes and China should produce solar panels, because they have comparative advantage in producing these goods, and then they should trade with each other to exchange airplanes and solar panels to receive benefits from international trade.