Unformatted text preview: are maximizers Absolute and Comparative Advantage 21:15 Absolute Advantage one entity can produce something either faster than or greater than another entity
Comparative Advantage one entity can produce something at a LOWER MARGINAL OPPORTUNITY PRODUCTION COST cost than another entity U.S. Canada
Maple Syrup 5 8
Copper Wire 6 7
5 steps to figuring out comparative advantage
1.Know the Definition of comparative advantage
2. Set up a table: Ireland ex: 1 Rum= _10_ Crystal, 1 Crystal= __1/10_ Rum
3. Go to the Xtremes (X and Y Games)
4. Fill in the blanks (starting with Puerto Rico first)
5. Circles and Arrows 21:15
Make yourself worse off in the short run to make yourself better in the long run
Production Possibility Curve PP Curve
PP Curve shifts outward its good, inward its bad
Five Variables that Shift the PP Outward:
Increase the productive labor force
Increase the quantity and quality of natural resources.
Increase the quantity and quality of capital stock.
Increase health and education....
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