Comparative and Absolute Advantage
1) Use the information below to determine who has the absolute advantage and the comparative advantage in each product.
Country Zeta has 20 airplanes and 80 pizzas.
Country Xray has 25 airplanes and 75 pizzas.
Who has the absolute advantage in pizzas?
Zeta, 80 > 75
Who has the absolute advantage in airplanes?
Xray, 25 > 20
Who has the comparative advantage in pizzas?
Zeta, 1/4 < 1/3
Who has the comparative advantage in airplanes?
Xray, 3 < 4
2) Use the information below to determine who has the absolute advantage and the comparative advantage in each product.
Meredith has 30 cans and 120 bowls
George has 10 cans and 60 bowls
Who has the absolute advantage in bowls?
Meredith, 120 > 60
Who has the absolute advantage in cans?
Meredith, 30 > 10
Who has the comparative advantage in bowls?
George, 1/6 < 1/4
Who has the comparative advantage in cans?
Meredith, 4 < 6
3) Use the graph below to determine who has the absolute advantage and the comparative advantage in each product.
Who has the absolute advantage in bowls?
Alpha, 50 > 30
Who has the absolute advantage in wheat?
Alpha, 100 > 90
Who has the comparative advantage in bowls?
3 > 1
Who has the comparative advantage in wheat?
Beta, 1/3 < 1/2
4) Use the graph below to determine who has the absolute advantage and the comparative advantage in each product.
Who has the absolute advantage in chicken?
Sam, 90 > 20
Who has the absolute advantage in cows?
Joe, 100 > 30
Who has the comparative advantage in chicken?
Sam, 1/3 < 5
Who has the comparative advantage in cows?
Joe, 1/5 < 3
5) Use the information below to determine who has the absolute advantage and the comparative advantage in each product.
Company A has 4 pastas and Company B has 3 pastas at the opportunity Cost of 1 pizza
Company A has 2 pizzas and Company B has 4 pizzas at the opportunity Cost of 1 pasta
Who should produce pizza?
Company B
Who should produce pasta?
Company A
6) Use the information below to determine who has the absolute advantage and the comparative advantage in each product.
Jonah has 6 Barbies and Collins has 8 barbies at the Opportunity Cost of 1 Toy Truck
Jonah has 5 Toy Trucks and Collins has 2 Toy Trucks at the Opportunity Cost of 1 Barbie
Who should produce Barbies?
Jonah
Who should produce toy trucks?
Collins
If the terms of trade are 1 Barbie for 6 Toy Trucks, should they trade?
No. They should NOT trade since 6 is outside the range of 2 and 5 Toy Trucks for 1 Barbie.