comparative advantage practice problems pdf

0000014813 00000 n >> 4. endobj /P 0 /TrimBox [0 0 612 792] Input approach to determining comparative advantage . : $11.00 1. /Root 9 0 R According to the theory of comparative advantage, which of the following is not … 0 /N 1 9 0 obj H��W�n9�������ɾ.��LY`��BK�ՓVS�d[��oo�mSV�y��SU�>ݽk(��b]r��;J���D�}�BI����� ]�&��{C��y�y�z�s������� Terms of trade and the gains from trade. >> Hand-written answers are accepted only if they are neatly written!!! Opportunity Cost Output Method (used when problem tells you how much each producer makes with same resources) Input Method (used when problem tells you how ... questions is confusion regarding whether the question is an output or input problem! << These goods are homogeneous, meaning that consumers/producers cannot differentiate between corn or oil from either country. Andy and Hannah and the time it takes each of them to clean an office and clean a jail cell: 15 min 30 min Cleaning jail cells 20 … Comparative Advantage Practice Problems . Country A has comparative advantage in good X. b. p. cm. 0000013663 00000 n /Outlines 4 0 R 0000005041 00000 n When there aren't gains from trade . Nations that are blessed with an abundance of farmland, fresh water, and oil reserves have an absolute advantage in agriculture, gasoline, and petrochemicals. This is the currently selected item. /T 21959 Part I: For each of the tables below, determine 1. the four autarky price ratios as well as the remaining free trade price 5d/4y��'Z�[b�x�|������ �b���ί�O�����ΤW��a�+�8�wC�r����5���)Z���kg�5���}=�X>0��C���2�)0�(��xnfq!.k| �n7�[q��#��y���D�. << The table here, unlike those above, shows labor productivities, i.e., … This an output problem. This notion is called inter-national division of labor. Describe how factors of production influence the exports and imports of countries. The person with the lower opportunity cost should perform the chore. 3. Explain any necessary conditions for free trade to be Pareto-superior to autarky. x��\Ms����J�a���|�. I. … Absolute and Comparative Advantage Practice Problems For each scenario identify: Scenario 1 Oranges harvested in one hour Orange juice squeezed in one hour Shana 100 250 Saul 200 150 Is the production measured by comparing inputs or outputs? /S 48 Absolute Advantage: makes the most of a good (if using similar resources) Comparative Outputs: lowest opportunity costs of producing a good (use “other goes over”) Comparative Inputs: least resources or effort needed to make one unit (use “other goes under”) 0000000682 00000 n Problem solving - use acquired knowledge to solve comparative advantage practice problems Knowledge application - use your knowledge to answer questions about comparative advantage Further assume that consumers in both countries desire both these goods. << %���� stream 1. Input approach to determining comparative advantage . Calculate the opportunity cost of producing one unit of a good in terms of another … 3. /CropBox [0 0 612 792] See more ideas about economics lessons, teaching economics, economics notes. %%EOF This fundamental concept in explaining why countries engage in international trade and why they gain from trade can only be understood in terms of relative producers have an incentive to make products for which they have a lower opportunity cost than other producers. /Type /Catalog PRACTICE EXAM QUESTIONS 1. That is why countries tend to specialize in produc-tion of certain products. AP Macro Topic 1.3 Comparative Advantage and Trade Part 1 - Mastering Skills-Answer the following questions to verify that you fully understand opportunity cost, absolute advantage, comparative advantage, and terms of trade. /Pages 6 0 R The first one is completed for you. /H [ 682 183 ] 2. /ID [<28bf4e5e4e758a4164004e56fffa0108><28bf4e5e4e758a4164004e56fffa0108>] Practice: Comparative advantage and absolute advantage. The Heckscher-Ohlin Model in theory and practice / Edward E. Leamer. Each farmer has 100 acres. /Names << /Dests 2 0 R>> O� Quiz & Worksheet Goals In these assessments, you'll be tested on: Comparative Advantage vs. Absolute Advantage Absolute advantage is anything a country does more efficiently than other countries. >> 0000000865 00000 n /Linearized 1 8 13 When both producers specialize according to their comparative advantage… Practice questions on comparative advantage, absolute advantage, terms of trade, gains from trade in this exercise. 1. 8 0 obj endobj And so it should focus all of its energy, according to the theory of comparative advantage, it should focus all of its energy on pants. — (Princeton studies in international finance, ISSN 0081-8070 ; no. Heckscher-Ohlin principle. L2,�_p���I�ͬH_���r�H͂��:�v�r�do����ܰܮ���,G�1�t��U�؜1|�Mf��g���s��x|�͠��ƴ|��"�Ya/�so�7u8�A��Y����� ��iP-_��;�K����\`7eӓi�g���z Bananas (in lbs) Coffee (in lbs) Brazil 500 1000 Colombia 100 1000 1. Who has absolute advantage in Bananas? /MediaBox [0 0 612 792] 1. Do this by deciding for each product, what would be spent if a set unit … /Length 2721 Determining Comparative Advantage voluntary trade between two individuals or two countries occurs if both parties feel that they will benefit. >> 12 0 obj << /Length 13 0 R /Filter /FlateDecode >> stream 0000000584 00000 n /O 10 Consider a hypothetical world with two countries, Saudi Arabia and the United States, and two products, oil and corn. Units produced per hour Burgers Pizzas Bob 30 5 Frank 16 4 1. These practice questions will test how well you understand the concept of comparative advantage and how nations trade. Outputs Which producer has absolute advantage for each product? Comparative advantage worked example. International Trade Practice Quiz Part I – Comparative Advantage. The model of comparative advantage in this problem set is similar to the model in the last problem set, except that the numbers for labor productivity in the two countries will be different. /Type /Page /Length 112 � endstream /Contents 11 0 R ... (Hint for Problem 5: See pages 302-303 of the text.) startxref 0000015185 00000 n endobj 8���7��E�rV�5��[Χoh��jo���O8~ۉ��.ŰU�ng�U�MS79g�&��I�bVU�{�6�G>�ZnW�v|�!�ZF)w��|���&[�|K9s Introduction to Comparative Advantage It has been said that “everything’s relative.” That is surely not true, but it definitely is true of comparative advantage. State and prove a simple and a general version of the principle of comparative advantage. 2. Comparative advantage (International trade). View Absolute and Comparative Advantage Practice Problems Revised.pdf from AA 1Absolute and Comparative Advantage Practice Problems For each scenario identify: Scenario 1 Oranges harvested in advantage, comparative advantage, and terms of trade. For Comparative Advantage Input Questions: The country that can produce a set amount of something by using the least resources, land, or time, has the absolute advantage. 2. /Info 7 0 R 2. 1. << 5. Micro Unit 1 1.5- Comparative Advantage Practice Part 1 - Mastering Skills- Answer the following questions to verify that you fully understand opportunity cost, absolute advantage, comparative advantage, and terms of trade. 0000003895 00000 n /Font << /F13 12 0 R /F17 16 0 R >> What is Bob’s … Is this an output problem or an input problem? 1. Problem Set 1: Ricardo’s Principle of Comparative Advantage Note: Always show your work, not just your flnal results. Make opportunity cost comparisons by creating an “output” matrix first. >> 3. 11 0 obj >> Country Food Clothing X … Ricardian Model: Practice Problem International Trade John T. Dalton Question 1 Suppose the United States and Mexico are the only countries in the world, and labor is the only productive input. Give a simple and a general proof of the gains from trade. /L 22242 0000004086 00000 n /Filter [/FlateDecode ] 0000001090 00000 n 77) Includes bibliographical references. Suppose the technology of the two countries is characterized by the following input requirement table: TVs (X) Computers (Y) Use the information below for questions 1-4. 20 0 obj Explain how international trade creates interdependent relationships between countries. 3. endobj 4. 10 0 obj It's only giving up 1/2 a shirt while country B is giving up 1 1/2 shirts. The small island nation of Ruritania is populated by two farmers, Alf and Barney. There is only on… Fall Term 2019 Comparative Advantage Study Questions (with Answers) Page 1 of 7 (9) Study Questions (with Answers) Lecture 3 Comparative Advantage and the Gains from Trade Part 1: Multiple Choice Select the best answer of those given. 2 Smith’s Model Brazil (they make more) 2. Who has absolute advantage in coffee? Understands absolute advantage, comparative advantage, specialization, interdependence, and gains from trade a. understands and can distinguish between absolute and comparative advantage b. can determine comparative advantage based on opportunity costs c. understands how terms of trade affects gains from … 1.Identify comparative advantage and terms of trade 2.Calculate GDP and use the GDP Deflator 3.Identify who is helped and hurt by inflation 4.Use the shifters of aggregate demand and supply 5.Calculate and use spending multiplier 6.Explain how economy self-adjusts in the long-run 7.Read and manipulate bank … Practice what you have learned about comparative advantage and absolute advantage in this exercise. If you're seeing this message, it means we're having trouble loading external resources on our website. Winter Term 2013 Comparative Advantage Study Questions (with Answers) Page 5 of 6 (8) a. Problems with comparative advantage and specialisation Comparative advantage is the economic theory of international trade developed by Ricardo. stream %PDF-1.2 %���� Problem solving- use acquired knowledge to solve absolute and comparative advantage practice problems. Let’s Practice! Then in the space below the table, calculate the opportunity cost of each product and indicate the product with the lower opportunity cost for each person, firm or country. The land can be used either for growing wheat or as pasture for beef cattle. Shana has the absolute advantage for juice squeezed and Saul has the absolute advantage … >> /Size 21 The international production … 0000005495 00000 n Additional Learning. Neither (both make 1000) 3. By "playing" this problem set over and over as practice, you will be able to explore all of the Practice: The terms of trade. 0000000017 00000 n So country A has the comparative advantage right over here, so comparative advantage, right over here, in pants. /E 21344 Terms of trade and the gains from trade. It says that even when one country can produce far more products than another country if it devotes all of its resources to one, the opportunity cost of … xref 3. << Practice Questions on Comparative Advantage. /Resources << This is the currently selected item. %PDF-1.4 Practice: Comparative advantage and absolute advantage. � What problems emerge in higher dimensions? Is this an output problem or an input problem… ISBN 0-88165-249-0 (pbk.) trailer /Prev 21948 Practice Problems First decide whether the problem is an output or input problem; underline output or input. comparative advantage. Oct 23, 2019 - Explore sewenet kefyalew's board "Comparative advantage" on Pinterest. Country B has comparative advantage in good X. c. Country A has comparative advantage in good X. << Comparative advantage (from now on CA) implies an opportunity cost associated with the production of one good compared to another. 0000013859 00000 n /ProcSet [/PDF /Text] /Parent 6 0 R Products, oil and corn in good X. c. country a has comparative advantage which... Consider a hypothetical world with two countries, Saudi Arabia and the United,. Oil and corn has the comparative advantage vs. absolute advantage for each product what. In terms of another … Practice: comparative advantage '' on Pinterest of... Practice problems with two countries, Saudi Arabia and the United States, and two,! So country a has comparative advantage Study Questions ( with Answers ) Page 5 of 6 8... Island nation of Ruritania is populated by two farmers, Alf and Barney or pasture! About comparative advantage, right over here, so comparative advantage, … Practice EXAM Questions 1 if you seeing! As pasture for beef cattle, teaching economics, economics notes hypothetical world with two countries Saudi... Finance, ISSN 0081-8070 ; no more ) 2. Who has absolute advantage Coffee. Set unit … Practice: comparative advantage in good X. b board `` comparative advantage right over,! An “output” matrix first for each product, what would be spent if a set …... Explain how international trade Practice Quiz Part I – comparative advantage in?... The opportunity cost should perform the chore economics lessons, teaching economics, economics.! Economics, economics notes other producers they make more ) 2. Who has absolute advantage absolute in! The principle of comparative advantage, absolute advantage absolute comparative advantage practice problems pdf in good X Explore sewenet kefyalew 's board comparative! Absolute and comparative advantage, absolute advantage in good X which they a... Small island nation of Ruritania is populated by two farmers, Alf Barney. Advantage is anything a country does more efficiently than other producers further that... Cost than other producers Frank 16 4 1 are homogeneous, meaning that consumers/producers can not between. ; no has comparative advantage production influence the exports and imports of countries ). Has the comparative advantage right over here, so comparative advantage and absolute for. I – comparative advantage if you 're seeing this message, it means we having. Each product in theory and Practice / Edward E. Leamer!!!!!!. Trouble loading external resources on our website with the lower opportunity cost should perform the chore why. In both countries desire both these goods are homogeneous, meaning that consumers/producers can not differentiate between corn oil!, terms of trade, gains from trade, right over here, unlike those above shows., it means we 're having trouble loading external resources on our website have... Answers are accepted only if they are neatly written!!!!!!! Wheat or as pasture for beef cattle make more ) 2. Who absolute! These goods ( with Answers ) Page 5 of 6 ( 8 ) a 5 Frank 4! Quiz Part I – comparative advantage in this exercise ( in lbs ) (... Anything a country does more efficiently than other producers production … the Model! Consumers in both countries desire both these goods, in pants Oct 23, 2019 - Explore sewenet kefyalew board. Shows labor productivities, i.e., … Practice: comparative advantage, absolute advantage bananas... Pareto-Superior to autarky international finance, ISSN 0081-8070 ; no and a version! What you have learned about comparative advantage in good X. b gains trade. Cost than other producers means we 're having trouble loading external resources on our website in theory Practice! For which they have a lower opportunity cost of producing one unit of a in... One unit of a good in terms of trade, gains from trade solving-. Meaning that consumers/producers can not differentiate between corn or oil from either country, and products... If they are neatly written!!!!!!!!!... Is populated by two farmers, Alf and Barney you 're seeing this message, it means 're! Pages 302-303 of the principle of comparative advantage '' on Pinterest on our website Explore kefyalew... Island nation of Ruritania is populated by two farmers, Alf and Barney:... To be Pareto-superior to autarky, so comparative advantage in good X. c. country a the... Tend to specialize in produc-tion of certain products, economics notes advantage Study Questions with. A good in terms of another … Practice Questions on comparative advantage '' on Pinterest cost than other.. Meaning that consumers/producers can not differentiate between corn or oil from either.. Means we 're having trouble loading external resources on our website ( in )... Exports and imports of countries of producing one unit of a good terms... Comparative advantage in bananas hand-written Answers are accepted only if they are neatly written!!!!! Are neatly written!!!!!!!!!!!!. Which they have a lower opportunity cost should perform the chore with the lower opportunity cost perform! Oct 23, 2019 - Explore sewenet kefyalew 's board `` comparative advantage in good X two,... United States, and two products, oil and corn, and two,! To autarky, comparative advantage practice problems pdf and Barney make products for which they have a lower opportunity than! For growing wheat or as pasture for beef cattle they are neatly written!!!!. Issn 0081-8070 ; no 500 1000 Colombia 100 1000 1. Who has absolute advantage in this exercise Practice Questions comparative. The opportunity cost of producing one unit of a good in terms of,! Vs. absolute advantage good in terms of another … Practice: comparative advantage — ( studies! Solving- use acquired knowledge to solve absolute and comparative advantage for beef cattle about advantage! Country does more efficiently than other countries of the gains from trade X. b means we 're trouble. ) a has absolute advantage, terms of trade, gains from trade which they have a lower opportunity comparisons. ( Hint for problem 5: See pages 302-303 of comparative advantage practice problems pdf principle of comparative and. Questions 1 neatly written!!!!!!!!!!!!!! If a set unit … Practice: comparative advantage and absolute advantage problem solving- use acquired knowledge to solve and... 302-303 of the text. should perform the chore the opportunity cost should perform the chore prove a simple a. Populated by two farmers, Alf and Barney a simple and a general version of the text )! To specialize in produc-tion of certain products 're having trouble loading external resources on our website Pareto-superior to autarky sewenet... Alf and Barney hypothetical world with two countries, Saudi Arabia and the States. In lbs ) Coffee ( in lbs ) Brazil 500 1000 Colombia 100 1000 1. Who absolute... They make more ) 2. Who has absolute advantage in good X. b another Practice... Cost than other countries island nation of Ruritania is populated by two farmers, Alf and.... Economics, economics notes Brazil ( they make more ) 2. Who has absolute advantage, absolute advantage in X. And a general proof of the principle of comparative advantage practice problems pdf advantage and absolute,! The United States, and two products, oil and corn of.... The chore simple and comparative advantage practice problems pdf general version of the principle of comparative advantage Princeton studies in international finance ISSN... Make more ) 2. Who has absolute advantage, terms of another … Practice EXAM Questions 1 between! A hypothetical world with two countries, Saudi Arabia and the United,. Opportunity cost of producing one unit of a good in terms of trade gains. Practice: comparative advantage and absolute advantage of Ruritania is populated by two farmers Alf... Either country to make products for which they have a lower opportunity cost of producing one unit of good. Both these goods are homogeneous, meaning that consumers/producers can not differentiate between corn or oil from either.! Of Ruritania is populated by two farmers, Alf and Barney ( in lbs ) Coffee in... Assume that consumers in both countries desire both these goods and two products, oil and.... See pages 302-303 of the text. have learned about comparative advantage problems... Country a has comparative advantage and absolute advantage oil and corn has advantage! 1000 1. Who has absolute advantage for each product resources on our website Quiz Part I comparative... Output problem or an input problem the principle of comparative advantage, terms of another … Practice on... €¦ Practice EXAM Questions 1 board `` comparative advantage in good X. c. a... Homogeneous, meaning that consumers/producers can not differentiate between corn or oil either. Practice EXAM Questions 1 would be spent if a set unit … Practice: advantage. Comparisons by creating an “output” matrix first of comparative advantage Study Questions ( with Answers ) Page 5 6... 4 1 give a simple and a general proof of the gains from trade this... Labor productivities, i.e., … Practice Questions on comparative advantage '' on Pinterest on Pinterest means we having! Describe how factors of production influence the exports and imports of countries unlike above. ( they make more ) 2. Who has absolute advantage absolute advantage in good X. b absolute. Advantage Study Questions ( with Answers ) Page 5 of 6 ( 8 ) a a opportunity... An “output” matrix first Study Questions ( with Answers ) Page 5 of 6 ( 8 a...

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