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What is the comparative advantage of Little Country in the example provided?
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Little Country has a comparative advantage in meat production, as its opportunity cost to produce meat is lower (1 ton of grain) compared to Big Country (2 tons of grain).
Why should countries specialize in production according to their comparative advantage?
Specialization allows countries to produce goods more efficiently and trade to achieve consumption outside their production possibilities.
What is an input problem in economic terms?
An input problem involves determining the comparative advantage based on the time or labor units needed to produce goods.
Does Big Country have a comparative advantage in grain or meat production? Explain.
Grain production, because Big Country's opportunity cost to produce grain is lower (0.5 tons of meat) compared to Little Country (1 ton of meat).
For mopping, who has the comparative advantage, Ashley or Omar? Provide calculations.
Ashley, because her opportunity cost of mopping is 2 vacuumings (6/3), lower than Omar's 3 vacuumings (12/4).
How do you determine comparative advantage in input problems?
Using the 'it over' formula, which calculates the amount of the other good that is sacrificed to produce one unit of the good in question.
Summarize the main benefit of specialization and trade.
Specialization based on comparative advantage allows countries to produce more efficiently and trade to achieve better outcomes.
What are the mutually beneficial trade terms for vacuuming in the example of Ashley and Omar?
Between 0.33 and 0.5 moppings per vacuuming.
What is the opportunity cost in economic terms?
The value of the next best alternative that you give up when making a choice.
How do you calculate comparative advantage for output problems?
Using the 'other over' formula, which calculates the opportunity cost of producing one good in terms of the other good.
What range must the terms of trade fall within to be mutually beneficial?
Between the opportunity costs of the two trading countries for that particular good.
How do you determine which country has the absolute advantage in grain production?
By comparing the total grain production of each country. The country that can produce more grain has the absolute advantage.
Explain with an example how non-mutual trade can affect countries.
If Big Country trades 1 ton of grain for 3 tons of meat, it benefits while Little Country suffers because the trade is outside the beneficial range.
Who has the absolute advantage in vacuuming, Ashley or Omar? Explain.
Ashley, because she takes less time (3 minutes) to vacuum compared to Omar (4 minutes).
What is the definition of absolute advantage?
The ability to produce more with fixed resources or the same amount with fewer resources.
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