Unformatted text preview: • Comparative advantage depends on opportunity cost whereas absolute advantage depends on your ability to perform one given activity better than another person. • How do we find a person’s comparative advantage? • An example from the text: Tom and Hank • International trade: a preview What is a production possibilities frontier? • Identifies all combinations of two goods that can be produced with a given quantity of resources (inputs). • Efficiency and the PPF • Opportunity cost and the PPF • The linear PPF: constant opportunity cost • The bowed-out PPF: increasing opportunity cost • Shifting the PPF...
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- Spring '08