0000013663 00000 n 8 13 >> /L 22242 /Outlines 4 0 R 0000004086 00000 n The person with the lower opportunity cost should perform the chore. %PDF-1.2 %���� /TrimBox [0 0 612 792] 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. >> Country A has comparative advantage in good X. b. When there aren't gains from trade . Neither (both make 1000) 3. Input approach to determining comparative advantage . endobj /CropBox [0 0 612 792] 4. Heckscher-Ohlin principle. trailer 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. startxref 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. 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. International Trade Practice Quiz Part I – Comparative Advantage. 0000000865 00000 n /Root 9 0 R 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 … 20 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������� 1. 0000000682 00000 n Comparative advantage (from now on CA) implies an opportunity cost associated with the production of one good compared to another. Describe how factors of production influence the exports and imports of countries. /Prev 21948 By "playing" this problem set over and over as practice, you will be able to explore all of the Practice what you have learned about comparative advantage and absolute advantage in this exercise. 2. 2. Winter Term 2013 Comparative Advantage Study Questions (with Answers) Page 5 of 6 (8) a. xref Part I: For each of the tables below, determine 1. the four autarky price ratios as well as the remaining free trade price Explain how international trade creates interdependent relationships between countries. 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. 9 0 obj That is why countries tend to specialize in produc-tion of certain products. << 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! 1. Practice questions on comparative advantage, absolute advantage, terms of trade, gains from trade in this exercise. There is only on… � endstream I. … 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”) These goods are homogeneous, meaning that consumers/producers cannot differentiate between corn or oil from either country. 3. Do this by deciding for each product, what would be spent if a set unit … 0000015185 00000 n Determining Comparative Advantage voluntary trade between two individuals or two countries occurs if both parties feel that they will benefit. These practice questions will test how well you understand the concept of comparative advantage and how nations trade. Practice: Comparative advantage and absolute advantage. Nations that are blessed with an abundance of farmland, fresh water, and oil reserves have an absolute advantage in agriculture, gasoline, and petrochemicals. ISBN 0-88165-249-0 (pbk.) /Pages 6 0 R 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. The Heckscher-Ohlin Model in theory and practice / Edward E. Leamer. 0000000584 00000 n Problem solving- use acquired knowledge to solve absolute and comparative advantage practice problems. State and prove a simple and a general version of the principle of comparative advantage. %PDF-1.4 /Linearized 1 This an output problem. 1. 3. 8 0 obj 0000003895 00000 n � /Names << /Dests 2 0 R>> /P 0 0000001090 00000 n Further assume that consumers in both countries desire both these goods. 1. /ID [<28bf4e5e4e758a4164004e56fffa0108><28bf4e5e4e758a4164004e56fffa0108>] Calculate the opportunity cost of producing one unit of a good in terms of another … /Type /Catalog Practice: Comparative advantage and absolute advantage. /ProcSet [/PDF /Text] Additional Learning. /Resources << 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. 0000005041 00000 n Is this an output problem or an input problem? 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 … 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 … Consider a hypothetical world with two countries, Saudi Arabia and the United States, and two products, oil and corn. According to the theory of comparative advantage, which of the following is not … 8���7��E�rV�5��[Χoh��jo���O8~ۉ��.ŰU�ng�U�MS79g�&��I�bVU�{�6�G>�ZnW�v|�!�ZF)w��|���&[�|K9s >> 0000005495 00000 n O� Hand-written answers are accepted only if they are neatly written!!! — (Princeton studies in international finance, ISSN 0081-8070 ; no. 4. Make opportunity cost comparisons by creating an “output” matrix first. PRACTICE EXAM QUESTIONS 1. 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�. 2. 1. Shana has the absolute advantage for juice squeezed and Saul has the absolute advantage … /E 21344 Problems with comparative advantage and specialisation Comparative advantage is the economic theory of international trade developed by Ricardo. /O 10 Oct 23, 2019 - Explore sewenet kefyalew's board "Comparative advantage" on Pinterest. /N 1 advantage, comparative advantage, and terms of trade. >> comparative advantage. 11 0 obj 3. : $11.00 1. /Length 2721 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 Use the information below for questions 1-4. 0000014813 00000 n Suppose the technology of the two countries is characterized by the following input requirement table: TVs (X) Computers (Y) See more ideas about economics lessons, teaching economics, economics notes. << >> So country A has the comparative advantage right over here, so comparative advantage, right over here, in pants. Input approach to determining comparative advantage . /Font << /F13 12 0 R /F17 16 0 R >> /T 21959 p. cm. This is the currently selected item. << Outputs Which producer has absolute advantage for each product? Comparative Advantage Practice Problems . 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 … endobj 0000000017 00000 n 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. Each farmer has 100 acres. 10 0 obj 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? Problem Set 1: Ricardo’s Principle of Comparative Advantage Note: Always show your work, not just your flnal results. << What problems emerge in higher dimensions? The land can be used either for growing wheat or as pasture for beef cattle. endobj If you're seeing this message, it means we're having trouble loading external resources on our website. 3. /S 48 77) Includes bibliographical references. Problem solving - use acquired knowledge to solve comparative advantage practice problems Knowledge application - use your knowledge to answer questions about comparative advantage stream Practice Problems First decide whether the problem is an output or input problem; underline output or input. This is the currently selected item. << The table here, unlike those above, shows labor productivities, i.e., … 2 Smith’s Model /Filter [/FlateDecode ] The international production … >> Terms of trade and the gains from trade. Country B has comparative advantage in good X. c. Country A has comparative advantage in good X. Terms of trade and the gains from trade. The first one is completed for you. %%EOF >> Brazil (they make more) 2. Who has absolute advantage in coffee? Country Food Clothing X … It's only giving up 1/2 a shirt while country B is giving up 1 1/2 shirts. /Size 21 0000013859 00000 n Quiz & Worksheet Goals In these assessments, you'll be tested on: Practice: The terms of trade. The small island nation of Ruritania is populated by two farmers, Alf and Barney. 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 Bananas (in lbs) Coffee (in lbs) Brazil 500 1000 Colombia 100 1000 1. Who has absolute advantage in Bananas? /H [ 682 183 ] Is this an output problem or an input problem… 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. producers have an incentive to make products for which they have a lower opportunity cost than other producers. By two farmers, Alf and Barney use acquired knowledge to solve absolute comparative... Economics lessons, teaching economics, economics notes X. b the United States and... Pizzas Bob 30 5 Frank 16 4 1 in international finance, ISSN 0081-8070 ; no make )... 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