Model Examples Comparative Advantage Absolute Advantage: Comparative Advantage: Assumptions a. Always make a 3x3 matrix b. Assume constant opportunity cost 1. Anna & Barry Potatoes per week Cabbage per week Anna 100 200 Barry 120 units 150 units a. What is this chart showing? b. Does anyone have an absolute advantage (circle on chart) Complete ratios below to see if there are benefits from trade? (other words: comparative advantage) Anna Barry 1 potato = 2 cabbage 1 potato= 5/4cabbage 1 cabbage= ______ potatoes 1 cabbage= ______ potatoes c.WHO IS COMPARATEVELY BETTER AT PRODUCING POTATOES? When producing potatoes, which farmer gives up the LEAST cabbage?(lower opportunity cost should specialize in making potatoes) ANSWER: BARRY: LOWER OC IN PRODUCING POTATOES (gives up less cabbage): so the world can enjoy more potatoes d. WHO IS COMPARATEVELY BETTER PRODUCING CABBAGE? When producing cabbage, which farmer gives up the least potatoes?(lower opportunity cost and should specialize in making cabbage) e. Are benefits to Anna & Barry trading with each other? 2. Henry & John: Fisherman who catch bass and catfish in one day Bass Catfish Henry 4 bass 6 catfish John 24 bass 12 catfish Henry John 1 Bass= 3/2 Catfish 1 Bass=______Catfish 1 Catfish=________ Bass 1 Catfish=_____ Bass Who has a comparative advantage in catching bass (lower oc)? Who has a comparative advantage in catching catfish (lower oc)?
Model Examples Comparative Advantage Absolute Advantage: Comparative Advantage: Assumptions a. Always make a 3x3 matrix b. Assume constant opportunity cost 1. Anna & Barry Potatoes per week Cabbage per week Anna 100 200 Barry 120 units 150 units a. What is this chart showing? b. Does anyone have an absolute advantage (circle on chart) Complete ratios below to see if there are benefits from trade? (other words: comparative advantage) Anna Barry 1 potato = 2 cabbage 1 potato= 5/4cabbage 1 cabbage= ______ potatoes 1 cabbage= ______ potatoes c.WHO IS COMPARATEVELY BETTER AT PRODUCING POTATOES? When producing potatoes, which farmer gives up the LEAST cabbage?(lower opportunity cost should specialize in making potatoes) ANSWER: BARRY: LOWER OC IN PRODUCING POTATOES (gives up less cabbage): so the world can enjoy more potatoes d. WHO IS COMPARATEVELY BETTER PRODUCING CABBAGE? When producing cabbage, which farmer gives up the least potatoes?(lower opportunity cost and should specialize in making cabbage) e. Are benefits to Anna & Barry trading with each other? 2. Henry & John: Fisherman who catch bass and catfish in one day Bass Catfish Henry 4 bass 6 catfish John 24 bass 12 catfish Henry John 1 Bass= 3/2 Catfish 1 Bass=______Catfish 1 Catfish=________ Bass 1 Catfish=_____ Bass Who has a comparative advantage in catching bass (lower oc)? Who has a comparative advantage in catching catfish (lower oc)?
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