Comparative_Advantage__Lesson_7_

Comparative_Advantage__Lesson_7_ - Technology and...

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

View Full Document Right Arrow Icon
1 Lesson 7 1 What are the characteristics of an economy that generate the kind of Production Possibilities Frontiers in previous lessons? Continue to assume only two goods ( X = bread, Y = cheese) Assume that labor ( L ) is the only input (factor of production). Technology and Comparative Advantage Lesson 7 2 In this Ricardian economy, technology is simple. How many units of labor are necessary to produce a unit of bread? How many are necessary to produce a unit of cheese? Suppose labor is measured in hours, and that by working one hour a worker can produce either 5 loaves of bread or 1 pound of cheese. Technology is a complete listing of all possible ways that a firm can use available inputs to produce outputs. Lesson 7 3 This technology is characterized by constant returns to scale: increase (or decrease) all inputs (in this case, labor is the only input) by the some percentage and output increases (or decreases) by the same percentage.
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 / 6

Comparative_Advantage__Lesson_7_ - Technology and...

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