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- In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine,) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? In what product should Japan specialize? In what product should Malaysia specialize?In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. a. Who has the absolute advantage in the production of rubber or radios? How can you tell? b. Calculate the opportunity cost of producing 80 additionalradiosinJapanandinMalaysia.(Your calculationmayinvolvefractions,whichisfine.) Which country has a comparative advantage in the production of radios? c. Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? d. In this example, does each country have an absoluteadvantageandacomparativeadvantage in the same good? e. InwhatproductshouldJapanspecialize?Inwhat product should Malaysia specialize?What are 5 techniques to employ comparative advantage?
- Once again, in an hour, Mateo can wash 2 cars or mow1 lawn, and Tyler can wash 3 cars or mow 1 lawn. Whohas the comparative advantage in car washing, andwho has the comparative advantage 10 lawn mow1ng?a. Mateo in washing, Tyler in mowing.b. Tyler in washi ng, Mateo in mow1ng.c. Mateo in washing, nei ther i n mowi ng.d. Tyler in washmg, neither in mowing.Country Jeans Corn Felicidad 8 32 Bellissima 12 24 Felicidad's opportunity cost of producing 1 pair of jeans is (1/2 , 1/4, 2, 4) of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is ( 1/2 , 1/4, 2, 4) of corn. Therefore, (FELICIDADS, BELLISSIMA) has a comparative advantage in the production of jeans, (FELICIDADS, BELLISSIMA) and has a comparative advantage in the production of corn. Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces jeans will produce_______________million pairs per week, and the country that produces corn will produce____________million bushels per week.Pat and Kris arc roommates. They spend most of their time studying (of course), but they leave some time for their favorite activities: making pizza and brewing root beer. Pat takes 4 hours to brew a gallon of root beer and 2 hours to make a pizza. Kris takes 6 hours to brew a gallon of root beer and 4 hours to make a pizza.a. What is each roommate’s opportunity cost of making a pizza? Who has the absolute advantage in making pizza? Who has the comparative advantage in making pizza?b. If Pat and Kris trade foods with each other, who will trade away pizza in exchange for root beer?c. The price of pizza can be expressed in terms of gallons of root beer. What is the highest price at which pizza can be traded that would make both roommates better off? What is the lowest price? Explain.
- Kayla can cook dinner in 30 minutes and wash thelaundry in 20 minutes. Her roommate takes twiceas long to do each task. How should the roommatesallocate the work?a. Kayla should do more of the cooking based onher comparative advantage.b. Kayla should do more of the washing based onher comparative advantage.c. Kayla should do more of the washing based onher absolute advantage.d. There are no gains from trade in this situation.The United States exports corn and aircraft tothe rest of the world, and it imports oil andclothing from the rest of the world. Do youthink this pattern of trade is consistent with theprinciple of comparative advantage? Why orwhy not?Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources.United States FranceAutomobiles 120 100Computers 60 55Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.1.2 Which country has a comparative advantage in the production of automobiles? Motivateyour answer. 1.3 Assume these countries trade with one another under the conditions of free trade. Whichcountry will specialise in the production of automobiles? Motivate your answer. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France.
- American and Japanese workers can each produce 4 cars a year. An American worker canproduce 10 tons of grain a year, whereas aJapanese workers can produce 5 tons of grain ayear. To keep things simple, assume that eachcountry has 100 million workers.a. For this situation, construct a table analogousto the table in Figure 1.b. Graph the production possibilities frontier ofthe American and Japanese economies.c. For the United States, what is the opportunitycost of a car? Of grain? For Japan, what is theopportunity cost of a car? Of grain? Put thisinformation in a table analogous to Table 1.d. Which country has an absolute advantage inproducing cars? In producing grain?e. Which country has a comparative advantagein producing cars? In producing grain?f. Without trade, half of each country’s workersproduce cars and half produce grain. Whatquantities of cars and grain does each country produce?g. Starting from a position without trade, givean example in which trade makes each country better…Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40 pounds of beef or 30 autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producingautos?WhatistheopportunitycostofproducingonepoundofbeefinBrazil?Whatistheopportunitycost of producing one pound of beef in the United States?Give an example in which one person has anabsolute advantage in doing something butanother person has a comparative advantage.
