2nd Edition

ISBN: 9781947172364

Author: Steven A. Greenlaw; David Shapiro

Publisher: OpenStax

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Textbook Question

Chapter 33, Problem 3SCQ

In France it takes one worker to produce one sweater, and one worker to produce one bottle of wine. In Tunisia it takes two workers to produce one sweater, and three workers to produce one bottle of wine. Who has the absolute advantage in production of sweaters? Who has the absolute advantage in the production of wine? How can you tell?

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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Chapter 33, Problem 2SCQ

Chapter 33, Problem 4SCQ

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In Japan, one worker can make 5 tons of rubber or 30 radios. In Malaysia, one worker can make 4 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell?

Assume England and Chad can both produce grain and dates, and that the only limited resource is the farming labor force, meaning that land, water, and all other resources are plentiful in both countries. Each farmer in England can produce 10 t of grain or 5 t of dates in a season. Each farmer in Chad can also produce 10 t of grain or 25 t of dates. Please answer the four questions. Which country has the absolute advantage in producing dates? Which country has the absolute advantage in producing grain? Which country has the comparative advantage in producing dates?

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine.) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? e. In what product should Japan specialize? In what product should Malaysia specialize?

Chapter 33 Solutions

Principles of Economics 2e

Ch. 33 - True or False: The source of comparative advantage...Ch. 33 - Brazil can produce 100 pounds of beef or 10 autos....Ch. 33 - In France it takes one worker to produce one...Ch. 33 - In Germany it takes three workers to make one...Ch. 33 - How can there be any economic gains for a country...Ch. 33 - Table 33.15 shows how the average costs of...Ch. 33 - If the removal of trade banters is so beneficial...Ch. 33 - What is absolute advantage? What is comparative...Ch. 33 - Under what conditions does comparative advantage...Ch. 33 - What factors does Paul Krugman identity that...

Ch. 33 - Is it possible to have a comparative advantage in...Ch. 33 - How does comparative advantage lead to gains from...Ch. 33 - What is intra-industry trade?Ch. 33 - What are the two main sources of economic gains...Ch. 33 - What is splitting up the value chain?Ch. 33 - Are the gains from international trade more likely...Ch. 33 - Are differences in geography behind the...Ch. 33 - Why does the United States not have an absolute...Ch. 33 - Look at Exercise 33.2. Compute the opportunity...Ch. 33 - You just overheard your friend say the following:...Ch. 33 - Look at Table 33.9. Is there a range of trades for...Ch. 33 - You just got a job in Washington, D.C. You move...Ch. 33 - Does intra-industry trade contradict the theory of...Ch. 33 - Do consumers benefit from intra-industry trade?Ch. 33 - Why might intra-industry trade seem surprising...Ch. 33 - In World Trade Organization meetings, what do you...Ch. 33 - Why might a low-income country put up barriers to...Ch. 33 - Can a nations comparative advantage change over...Ch. 33 - France and Tunisia both have Mediterranean...Ch. 33 - In Japan, one worker can make 5 tons of rubber or...Ch. 33 - Review the numbers for Canada and Venezuela from...Ch. 33 - In Exercise 33.31, is there an ask where...Ch. 33 - From earlier chapters you will recall that...Ch. 33 - Consider two countries: South Korea and Taiwan....Ch. 33 - If trade increases world GDP by 1 per year, what...

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