Chapter 3

Chapter 3 - CHAPTER 3 NOTES, ECON 2105, Harrison Hartman,...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 3 NOTES, ECON 2105, Harrison Hartman, Fall 2003, 8 am and 2 pm Absolute Advantage occurs when one county can produce more of all types of goods than another country can produce Comparative Advantage occurs when one county can produce a good at a lower opportunity cost than another country can produce The following production information pertains to France and Colombia. Suppose these two countries decide to produce only wine and coffee. Fill in the numbers in the table as given in lecture. These numbers show the maximum daily amount that each country could produce if it made only the good in that particular column (either wine or coffee). Assume that both countries produce these goods at a constant opportunity cost. Wine (bottles) Coffee (lbs.) Opportunity Cost Ratio France 8000 4000 2:1 Colombia 5000 2500 2:1 Does either country have an absolute advantage? If so, which country? France can produce more of both wine and coffee per day Does either country have a comparative advantage in producing coffee? If so, which one? No they both have the same opportunity cost Does either country have a comparative advantage in producing wine? If so, which one? No they both have the same opportunity cost
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Chapter 3 - CHAPTER 3 NOTES, ECON 2105, Harrison Hartman,...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online