Gains From Trade - Notes II COMPARATIVE ADVANTAGE AND GAINS...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Notes II COMPARATIVE ADVANTAGE AND GAINS FROM TRADE I. COMPARING TWO PPFS A. Consider Tom: 1. Tom can pick 30 coconuts in one day if he spends all day fishing. He can catch 40 fish if he spends all day picking coconuts. If Tom splits his time between picking coconuts and fishing he can produce any combination between these two extremes. 2. We can represent this in a PPF. 3. If Tom is alone, what he consumes must be what he“produces”. B. Consider Hank 1. Hank can catch 10 fish in one day if he spends all day fishing. He can pick 20 coconuts if he spends all day picking coconuts. If Tom splits his time between picking coconuts and fishing he can produce any combination between these two extremes.
Background image of page 1

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

View Full DocumentRight Arrow Icon
C. Determining Opportunity Cost 1. Tom’s PPF has a slope of -3/4. This slope represents the number of coconut Tom must give up for every fish he produces. This slope represents his opportunity cost of producing fish. 2.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/19/2010 for the course ECON ECON200 taught by Professor Ericka during the Spring '10 term at University of Washington.

Page1 / 4

Gains From Trade - Notes II COMPARATIVE ADVANTAGE AND GAINS...

This preview shows document pages 1 - 3. Sign up to view the full document.

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