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    Worksheet 4.4 Comparative Advantage

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    Anderson Wu

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    Worksheet 4.4 Comparative Advantage

    Uploaded by

    Anderson Wu
    225 views3 pages

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    225 views3 pages

    Worksheet 4.4 Comparative Advantage

    Uploaded by

    Anderson Wu

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
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    Worksheet 4.

    4: Comparative Advantage
    There are two nations that, using all of their resources, both produce lemon drops and boxes.
    Nation A can produce either 300 lemon drops and 0 boxes per day or 100 boxes and 0 lemon
    drops per day or any combination that lies on its constant cost PPC. Nation B can produce either
    200 lemon drops and 0 boxes per day or 200 boxes and 0 lemon drops per day or any
    combination that lies on its constant cost PPC.

    Draw a correctly labeled PPC for each nation. Use lemon drops on the vertical axis and boxes
    on the horizontal axis.

    Calculate the opportunity cost of producing each good for each nation. (Calculate means show
    your work.)

    Opportunity cost of Opportunity cost of


    Lemon Drops Boxes
    Lemon Drops Boxes

    Nation A

    Nation B

    What good should each nation specialize in? Why?

    What range would be acceptable terms of trade? Why?

    © 2015, BFW/ Worth Publishers Section 1


    Krugman’s Economics for AP®, 2e Teacher’s Resource Materials
    The U.S. and England have the following production possibility curves.

    United States England

    Using the information on the graphs above:

    The opportunity cost of 1 unit of Fish in the U.S. is ________________________.

    The opportunity cost of 1 unit of Chips in the U.S. is _________________________.

    The opportunity cost of 1 unit of Fish in England is _________________________.

    The opportunity cost of 1 unit of Chips in England is ________________________.

    The U.S. has an absolute advantage in _____________________.

    England has an absolute advantage in _____________________.

    The U.S. has a comparative advantage in _____________________.

    England has a comparative advantage in ___________________.

    © 2015, BFW/ Worth Publishers Section 1


    Krugman’s Economics for AP®, 2e Teacher’s Resource Materials
    Fill in the table below.
    With Trade With Trade
    Without Trade
    (production) (consumption)
    Chips Fish Chips Fish Chips Fish

    England

    United
    States

    Total

    Note: Assume that with trade, each country exports ½ of its production.

    What happens to total world output when the countries specialize and trade?

    Are the countries better off? Explain.

    There are two nations that both produce 100 lemon drops and 50 boxes using the same amount of
    resources. Nation A can produce lemon drops in 3 hours and boxes in 2 hours. Nation B can
    produce lemon drops in 4 hours and boxes in 5 hours.

    Calculate the opportunity cost of producing each good for each nation. (Calculate means show
    your work.)

    Opportunity cost of Opportunity cost of


    Lemon Drops Boxes
    Lemon Drops Boxes

    Nation A

    Nation B

    What good should each nation specialize in? Why?

    What range would be acceptable terms of trade? Why?

    © 2015, BFW/ Worth Publishers Section 1


    Krugman’s Economics for AP®, 2e Teacher’s Resource Materials

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