2. Comparative and absolute advantage Larry and Megan are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of corn and rye each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye the rest. Corn Rye (Bushels per acre) (Bushels per acre) Larry 40 8 Megan 28 7 On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Megan's PPF. (?) 200 180 160 140 120 100 80 60 40 20 0 has an absolute advantage in the production of rye. bushels of corn, whereas Megan's opportunity cost of producing 1 bushel of rye is opportunity cost of producing rye than Megan, has a comparative RYE (Bushels) 0 100 200 300 400 500 600 700 800 900 1000 CORN (Bushels) has an absolute advantage in the production of corn, and Larry's opportunity cost of producing 1 bushel of rye is bushels of corn. Because Larry has a advantage in the production of rye, and Larry's PPF Megan's PPF has a comparative advantage in the production of corn.
2. Comparative and absolute advantage Larry and Megan are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of corn and rye each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye the rest. Corn Rye (Bushels per acre) (Bushels per acre) Larry 40 8 Megan 28 7 On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Megan's PPF. (?) 200 180 160 140 120 100 80 60 40 20 0 has an absolute advantage in the production of rye. bushels of corn, whereas Megan's opportunity cost of producing 1 bushel of rye is opportunity cost of producing rye than Megan, has a comparative RYE (Bushels) 0 100 200 300 400 500 600 700 800 900 1000 CORN (Bushels) has an absolute advantage in the production of corn, and Larry's opportunity cost of producing 1 bushel of rye is bushels of corn. Because Larry has a advantage in the production of rye, and Larry's PPF Megan's PPF has a comparative advantage in the production of corn.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains Rrom Trade
Section: Chapter Questions
Problem 6PA
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Transcribed Image Text:2. Comparative and absolute advantage
Larry and Megan are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of corn and rye each farmer can produce
per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye on
the rest.
Corn
Rye
(Bushels per acre) (Bushels per acre)
Larry
40
8
Megan
28
7
On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond
symbol) to plot Megan's PPF.
(?)
200
180
160
140
120
100
80
60
40
20
0
has an absolute advantage in the production of rye.
bushels of corn, whereas Megan's opportunity cost of producing 1 bushel of rye is
opportunity cost of producing rye than Megan,
has a comparative
has a comparative advantage in the production of corn.
RYE (Bushels)
0
100 200 300
400 500 600 700 800 900 1000
CORN (Bushels)
has an absolute advantage in the production of corn, and
Larry's opportunity cost of producing 1 bushel of rye is
bushels of corn. Because Larry has a
advantage in the production of rye, and
Larry's PPF
Megan's PPF
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