{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

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

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.

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

View Full Document
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.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}