Answered: Suppose there are only two planets in…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter1: Welcome To Economics!

Section: Chapter Questions

Problem 2SCQ: Residents of the town of Smithfield like to consume hams, but each ham requires 10 people to produce...

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Suppose there are only two planets in the universe, Zenope and Zuranda. On each planet, its inhabitants consume two products—coffee and fried chicken. Each planet has an equal population. Producing solely coffee, Zenope can produce 50 units of coffee, while Zuranda can produce 80 units of coffee. Producing solely fried chicken, Zenope can produce 25 units, while Zuranda can produce 30 units. Fill in the remaining part of the table (be sure to label the units). Coffee Fried Chicken Opportunity Cost of 1unit of Coffee Opportunity Cost of 1 unit of Fried Chicken Zenope 50 units 25 units Zuranda 80 units 30 units 2. Which planet has the absolute advantage in coffee? 3. Which planet has the absolute advantage in fried chicken? 4. Which planet has the comparative advantage in coffee? 5. Which planet has the comparative advantage in fried chicken?

uppose there are only two planets in the universe, Zenope and Zuranda. On each planet, its inhabitan
has an equal population. Producing solely coffee, Zenope can produce 50 units of coffee, while Zuranda
Zenope can produce 25 units, while Zuranda can produce 30 units.
1. Fill in the remaining part of the table (be sure to label the units).
Zenope
Zuranda
Coffee
50 units
80 units
Fried Chicken
25 units
30 units
Opportunity Cost of 1unit of Opportunity Cost of 1
Coffee
unit of Fried Chicken
2. Which planet has the absolute advantage in coffee?
3. Which planet has the absolute advantage in fried chicken?
4. Which planet has the comparative advantage in coffee?
5. Which planet has the comparative advantage in fried chicken?

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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Absolute advantage refers to the ability to produce more goods using same resources or same quantity of goods with lesser resources than the competitor. Comparative advantage refers to the ability to produce goods and services at a lower opportunity cost than the competitor.

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