{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Assignment #3 - Practice Problems 3 For each of the...

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

View Full Document Right Arrow Icon
Practice Problems 3: For each of the following problems identify who has absolute advantage, who has comparative advantage and if it is input or output problem. 1. Days to Produce the Item Pen Pencil Jean 5 4 Mike 3 3 Jean has the absolute advantage in both Pens and Pencils because it takes him the least amount of days to produce each product. Jean has a comparative advantage in pencil making because she gives only gives up 4/5 of a day to produce the pen as opposed to Mike who would give up 1 day. Mike has a comparative advantage in pen making because he only gives up making 1 day to make a pencil as opposed to the 5/4 of a day Jean would have to give up. Jean should make pencils and trade for pens, and Mike should make pens and trade for pencils. This is an input problem. 2. Number Produced in given time period Books Computers Eve 4 2 Jake 5 5 Jake has the absolute advantage in both books and computers because he produces the most amounts of products in the given period of time. Eve has a comparative advantage in books because she only gives up making 1 book as opposed to Jake who would give up 2 books. Jake has a comparative advantage in computers because he would only give up making 1 computer as opposed to Eve who would give up 2 computers. Eve should make books and trade for computers, and Jake should make computers and trade for books. This is an output problem. 3. Acres to Produce Rice Soy France 60 12 German y 20 12 France has absolute advantage in only rice production. However, neither country has an absolute advantage in soy production. France has a comparative advantage in rice production because they give up only 1/5 of the rice production as opposed the 3/5 Germany would have to give up. Germany has a comparative advantage in soy production because they only give up 5/3 of the soy production as opposed to the 5 acres France would have to give up. France should produce rice and trade for soy, and Germany should produce soy and trade for rice. This is an output problem. 4. From one ton of peanuts Peanut Butter Peanut Juice ABC Corp 50 20 DEF Corp 60 70 DEF Corp has absolute advantage in both peanut butter and peanut juice production from one ton of peanuts.
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern