BA 372 Lesson 2 Assignment 3

BA 372 Lesson 2 Assignment 3 - worker can produce 50 scones...

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Ashley B. Hilliard 258-10-0169 July 5, 2010-October 22, 2010 BA 372 Lesson#2, Assignment 3 1. Give an example in which one person has an absolute advantage in doing something but another person has a comparative advantage. Explain. U.S. has the absolute advantage in staffing call centers for U.S. companies. India has comparative advantage of having call centers for US companies due they can staff and employee call centers for lower wages than American companies can. 2. Why do economists oppose policies that restrict trade among nations? Economists oppose policies that restrict trade among nations because trade allows all countries to achieve greater prosperity by allowing them to receive the gains from comparative advantage. Restrictions on trade hurt all countries in some way. 3. England and Scotland both produce scones and sweaters. Suppose that an English
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Unformatted text preview: worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour. A. Which country has the absolute advantage in the production of each good? Which country has the comparative advantage? England has the comparative advantage and Scotland has an absolute advantage. B. If England and Scotland decide to trade, which commodity will Scotland trade to England? Explain. Scotland would trade scones because England has the ability to produce more scones per hour that Scotland. C. If a Scottish worker could produce only 1 sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain. Neither country would not stand to gain from the trade because they both would be producing only 1 sweater per hour....
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This note was uploaded on 02/22/2011 for the course ECON BA 372 taught by Professor Dickliter during the Summer '10 term at Andrew Jackson.

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