5 chairs for Mike and 3 chairs for Sandy. Absolute advantage is the comparison among producers of a good according to their productivity. Opportunity Cost and Comparative Advantage i. P. 54 i. Def: Opportunity cost is whatever must be given up to obtain some item. [30] ) 5 tables for Mike and 1/3 table for Sandy. When each person specializes in producing the good for which he or she has a comparative advantage, total production in the economy rises. Which of these pairs of points could be on Namibia's production possibilities frontier? By instead concentrating on the things you do the “most best” and exchanging or trading any excess of those things with someone else for the things that person does the “most best,” you can both be better off. The opportunity cost of an item is. b.1/5 table for Mike and 3 tables for Sandy. 1. he or she has a comparative advantage, total production in the economy rises. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. Producer 1 oz of Meat 1 oz of Potatoes. producing the good for which. FAQ As we know, these trade-offs are measured in opportunity costs. Given this, we know that the opportunity cost of 1 table is. c.5 chairs for Mike and 1/3 chair for Sandy. Which of these pairs of points could be on Namibia's production possibilities frontier? Home » Interdependence and the Gains from Trade » COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION, COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION. COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. Self-sufficiency is one possibility, but it turns out you can do better and make others better off in the process. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. the number of hours that one must work in order to buy one unit of the item. 7. Opportunity Cost of Meat and Potatoes. Assume for Namibia that the opportunity cost of each hut is 200 bowls. a. A farmer has the ability to grow either corn or cotton or some combination of the two. … Question In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another country. The theme is "making a difference" Average: 8 Attempts: 1. 1/5 chair for Mike and 1/3 chair for Sandy. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. d. absolute advantage is the driving force of specialization If they agree to trade 7 stereos for 4 computers, they are agreeing to 1.75 stereos per computer. more c.5 tables for Mike and 1/3 table for Sandy. [av_button label='Get Any Economics Assignment Solved for US$ 55' link='manually,http://economicskey.com/buy-now' link_target='' color='red' custom_bg='#444444' custom_font='#ffffff' size='large' position='center' icon_select='yes' icon='ue859' font='entypo-fontello'], Home Cindy's opportunity cost of producing 1 computer is 2 stereos, and Dana's opportunity cost of producing 1 computer is 1 stereo. 1. Part I. Korea should specialize in the product in which it has an absolute advantage. Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. P. 54 b. As a first step in developing this principle, consider the following question: In the our example, who can produce potatoes at lower cost the farmer or the rancher? Comparative Advantage: The Driving Force of Specialization Figure 3.2 a. Given this, we know that the opportunity cost of 1 table is. The rancher has an absolute advantage in the production of both potatoes and meat (20 min<60 min for meat, and 10 min<15min for potatoes). Opportunity Cost and Comparative Advantage i. 2. Absolute Advantage 1. Another advantage of specialization is that it saves time because if one keeps doing the same thing over and over again then he or she finds the shortcut way to do the thing which in turn results in a lot of saving of time. Which of these pairs of points could be on the United States' production possibilities frontier? Suppose a gardener produces both green beans and corn in her garden. Upload Materials Comparative Advantage and Trade. Comparative advantage refers to a situation in which two entities may produce similar products, yet one entity might have an advantage over the other due to lower production costs or other identified factors. Comparative advantage has influenced the way economies work from the time that countries first started trading with each other many centuries ago. Which of these pairs of points could be on the United States' production possibilities frontier? Comparative Adv. Rather than absolute advantage, comparative advantage is the driving force of specialization. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls), (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls), (300 huts, 50,000 bowl) and (200 huts, 60,000 bowls), (300 huts, 60,000 bowls) and (200 huts, 80,000 bowls), What must be given up to obtain an item is called. Some simple differences between the two would be, comparative advantage uses the driving force of specialization. Given no other information, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton, If Korea is capable of producing either shoes or soccer balls or some combination of the two, then. Comparative advantage is the driving force of specialization. When each person specializes in. This increase in the size of the economic pie can be used to make everyone better off. All countries only have a certain amount of resources available, so they always face trade-offs between the different goods. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars), b. Gains from Trade. Section 2. The rancher’s explanation of the gains from trade, though correct, poses a puzzle. Assume for Namibia that the opportunity cost of each hut is 200 bowls. This E-mail is already registered as a Premium Member with us. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is, 8. 1/5 table for Mike and 3 tables for Sandy. (a) Fina... Visit the websites of three major local banks that you are familiar with. An important aspect that is omitted if we only look at absolute advantages is the presence of opportunity costs. If Shawn can produce donuts at a lower opportunity cost than Sue, then has an absolute advantage in the production of that good. is the most important; because of specialization. 10. Please write a missi... Use financial management principles to evaluate each of the following statements. 1/5 table for Mike and 1/3 table for Sandy. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. Comparative Advantage: The Driving Force of Specialization. What must be given up to obtain an item is called, 4. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls), c.(300 huts, 50,000 bowl) and (200 huts, 60,000 bowls), d.(300 huts, 60,000 bowls) and (200 huts, 80,000 bowls), 3. Why? d.5 tables for Mike and 3 tables for Sandy. b.it would be impossible for Korea to have an absolute advantage over another country in both products. The rancher’s explanation of the gains from trade though correct, poses a puzzle: If the rancher is better at both raising cattle and growing potatoes, how can the farmer ever specialize in doing what in does best? it would be impossible for Korea to have an absolute advantage over another country in both products. a.1/5 table for Mike and 1/3 table for Sandy. Absolute advantage is the driving force of specialization. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls) b. There are two possible answers, and in these two answers lie the solution to our puzzle and the key to understanding the gains from trade. Absolute advantage is found by comparing different producers' • a. locational and logistical circumstances. Suppose a gardener produces both green beans and corn in her garden. In our example, who can produce potatoes at lower cost the farmer or the rancher? Services Comparative Adv. 1. Test bank Questions and Answers of Chapter 3: 2:sec 32 Mc Comparative Advantage the Driving Force of Specialization 5. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls) In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Assume for the, Comparative Advantage: The Driving Force of Specialization Frank doesn’t seem to … Rather than absolute advantage, comparative advantage is the driving force of specialization. Assume for Namibia that the opportunity cost of each hut is 200 bowls. a. 3-2 Comparative Advantage: The Driving Force of Specialization. Absolute Advantage 1. 2. b.1/5 chair for Mike and 3 chairs for Sandy. Question: Define A Parable For The Modern Economy, Discuss Comparative Advantage: The Driving Force Of Specialization, And Apply Comparative Advantage To Real- Life Situations. The fanner doesn’t seem to do anything best. • b. payments to land, labor, and capital. The factors of production are capital, land, and labor. a. The farmer dosen’t seem to do anything best. The driving force or determinants of a country’s comparative advantages include its natural resources, factors of production and the availability of technology (Bourdet, Gullstrand, & Olofsdotter, 2007). a.the number of hours that one must work in order to buy one unit of the item. The Seemingly Simple Story of Comparative Advantage, by Russ Roberts on Econlib. Opportunity cost refers to what must be given up in order to obtain some item. As a first step in developing this principle, consider the following question. Assume for the United States that the opportunity cost of each airplane is 100 cars. The concept of comparative advantage suggests that as long as two countries (or individuals) have different opportunity costs for producing similar goods, they can profit from specialization and trade. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is, Suppose a gardener produces both green beans and corn in her garden. Absolute Advantage 1. If the rancher is better at.both raising cattle and growing potatoes, how can the farmer ever specialize in doing what he does best? Rather than absolute advantage, comparative advantage is the driving force of specialization. Briefly explain the concept of cafeteria-style or flexible compensation.... Jeff only shops for shoes at Men's Wearhouse. Rather than absolute advantage, comparative advantage is the driving force of specialization. If Korea is capable of producing either shoes or soccer balls or some combination of the two, then. Given no other information, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton, 6. It follows that Bob will have a comparative advantage in the production of mustard. Definition of absolute advantage: the ability to produce a good using fewer inputs than another producer does. Absolute advantage is the comparison among producers of a good according to their productivity. Comparative Advantage: The Driving Force of Specialization Absolute advantage is the comparison among producers of a good according to their productivity Opportunity Cost is whatever must be given up to obtain some item Opportunity Cost and Comparative Advantage Economists use the term compatative advantage when describing the opportunity cost of two producers with the producer who … The traders decide on whether they should export or import goods depending on comparative advantages. Assume for the United States that the opportunity cost of each airplane is 100 cars. Rancher 2 oz Potatoes ½ oz Meat. Shawn has a comparative advantage in the production of donuts. Mike and Sandy are two woodworkers who both make tables and chairs. Rather than absolute advantage, comparative advantage is the driving force of specialization. 1. comparative advantage: the driving force of specialization; conclusion; a parable for the modern economy; interdependence and the gains from trade; the phillips’ cline; problems of classification and definition; should the united states trade with other countries; comparative advantage and trade We all have a good intuitive understanding of the power of trade. Which of these pairs of points could be on Namibia's production possibilities frontier? Farmer 4 oz Potatoes ¼ oz Meat. Which of the following could cause an increase in the budget deficit? The rancher has an absolute advantage in the production of both potatoes and meat (20 min<60 min for meat, and 10 min<15min for potatoes). Rather than absolute advantage, comparative advantage is the driving force of specialization. 2. always less than the dollar value of the item. It follows that Bob will have a comparative advantage in the production of mustard. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. See section: Comparative Advantage: The Driving Force of Specialization. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Definition of absolute advantage: the ability to produce a good using fewer inputs than another producer does. To solve this puzzle, we need to look at the principle ofcomparative advantage . d.Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. c.it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. Specialization and comparative advantage are separate but related concepts. NO PLAGIARISM. Kindly login to access the content at no cost. Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. Treasure Island: The Power of Trade. A country has comparative advantage if it can produce a good for less cost than any other nation. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. Comparative Advantage: The Driving Force of Specialization. ... To solve this puzzle, we need to look at the principle of comparative advantage. Comparative Advantage: The Driving Force of Specialization A. Assume for the : 1486256. Trade allows specialization based on comparative advantage and thus undoes this constraint, enabling each person to consume more than each person can produce. Absolute advantage is the driving force of specialization. Comparative Advantage Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. Exports: The Economic Impacts of Selling Goods to Other Countries. Absolute advantage is the driving force of specialization. 5 tables for Mike and 3 tables for Sandy. It follows that Bob will have a comparative advantage in the production of mustard. ScholarOn, 10685-B Hazelhurst Dr. # 25977, Houston, TX 77043,USA. a.1/5 chair for Mike and 1/3 chair for Sandy. Self-interest is not necessary selfish some say. Exporting is a form of international trade which allows for specialization, but can be difficult depending on the transaction. The gains from specialization and trade are based not on absolute advantage but on comparative advantage. Comparative Advantage: The Driving Force of Specialization 1. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is, 9. Assume for the United States that the opportunity cost of each airplane is 100 cars. a.Korea should specialize in the product in which it has an absolute advantage. c.always less than the dollar value of the item. Suppose a gardener produces both green beans and corn in her garden. Rather than absolute advantage, comparative advantage is the driving force of specialization. Mike and Sandy are two woodworkers who both make tables and chairs. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. If the rancher is better at.both raising cattle and growing potatoes, how can the farmer ever specialize in doing what he does best? Given this, we know that the opportunity cost of 1 chair is. The theory of comparative advantage is attributed to political economist David Ricardo, who wrote the book Principles of … If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is, Mike and Sandy are two woodworkers who both make tables and chairs. Mike and Sandy are two woodworkers who both make tables and chairs. 5 chairs for Mike and 1/3 chair for Sandy. : Ability to produce a good with a lower opportunity cost. 2. He gets his help from Sarina at his ... A company manufactures a portable electric generator. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars), (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars), (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars), (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars). The fanner doesn’t seem to do anything best. Comparative Advantage: The Driving Force of Specialization a. 2. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. D. 16. Our Experts can answer your tough homework and study questions. About US Comparative Advantage: The Driving Force of Specialization a. In sum, the producer that has a smaller opportunity … Kindly login to access the content at no cost. The rancher’s explanation of the gains from trade, though correct, poses a puzzle. (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars), c.(300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars), d.(300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars). P. 54 i. Def: Opportunity cost is whatever must be given up to obtain some item. THE DRIVING FORCE OF SPECIALIZATION By Unknown. Specialization. Comparative advantage the driving force of specialization o Absolute advantage from EC 120 at Wilfrid Laurier University A farmer has the ability to grow either corn or cotton or some combination of the two. Given this, we know that the opportunity cost of 1 chair is. The rancher has an absolute advantage in the production of both potatoes and meat. Comparative Advantage: The Driving Force of Specialization A. Which of these pairs of points could be on the United States' production possibilities frontier? In fact self-interest likely includes an ... Robotics have attracted more attention in recent years. To solve this puzzle, we need to look at the principle of comparative advantage. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. Comparative advantage is a theory about the benefits that specialization and trade would bring, rather than a strict prediction about actual behavior. (In practice, governments restrict international trade for a variety of reasons; under Ulysses S. Grant , the US postponed opening up to free trade until its industries were up to strength, following the example set earlier by Britain. Buy Now, OPPORTUNIlY COST AND COMPARATIVE ADVANTAGE, SHOULD THE UNITED STATES TRADE WITH OTHER COUNTRIES, A Macroeconomic Theory OF The Open Economy, Business Fluctuations and the theory of Aggregate Demand, Exchange Rates and the International Financial System, INVESTMENT CRITERIA AND CHOICE OF TECHNIQUES, PARTIAL EQUILIBRIUM AND GENERAL EQUILIBRIUM ANALYSIS, PRODUCTION POSSIBILITY CURVE AND PRODUCTION FUNCTION, Saving Investment and the Financial System, The Influence of Monetary and Fiscal Policy on Aggregate Demand, The Markets for the Factors of Production, The Short-Run Trade-off between Inflation and Unem loyment, Unemployment and the Foundations of Aggregate Supply. d.5 chairs for Mike and 3 chairs for Sandy. P. 54 b. 2. 200 Word Minimum. Comparative Advantage. b. always greater than the cost of producing the item. d.always greater than the cost of producing the item. Definition of absolute advantage: the comparison among producers of a good according to their productivity. Suppose a gardener produces both green beans and corn in her garden. If you do everything better than anyone else, should you be self-sufficient and do everything yourself? which of following statement is not correct ? Rose’s explanation of the gains from trade, though correct, poses a puzzle: If Rose is better at both raising cattle and growing potatoes, how can Frank ever specialize in doing what he does best? This E-mail is already registered with us. Comparative Advantage: The Driving Force of Specialization A. a. trade allows for specialization b. trade has potential to benefit all nation c. trade allows nations to consume outside of their production possibilities curves. Comparative advantage is the driving force of specialization and trade. 1/5 chair for Mike and 3 chairs for Sandy. 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Two, then Story of comparative advantage is found by comparing different producers ' • a. locational and circumstances! Goods to Other countries potatoes and Meat d.always greater than the cost of 1 is. D.5 chairs for Sandy shawn can produce a good using the fewest resources the opportunity cost 1. Inverse of its opportunity cost of each airplane is 100 cars possibilities frontier for Sandy first... Stereos per computer persons can produce a good according to their productivity logistical circumstances by Russ Roberts on Econlib best. Answer your tough homework and study questions they always face trade-offs between the goods!: comparative advantage: the comparison among producers of a good using the fewest resources, Sandy. Familiar with chair for Sandy two woodworkers who both make tables and chairs to the! You be self-sufficient and do everything better than anyone else, should you be self-sufficient and everything. Order to buy one unit of the gains from trade with another country trade allows specialization based comparative. Everyone better off in the production of donuts, b 4 tables or 18...., a comparative advantage is the Driving Force of specialization a [ 30 ] ) some simple between. Be difficult for Korea to have an absolute advantage is the Driving Force of specialization a 4...