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Unformatted text preview: mic terms, for
the United States, the opportunity cost of 1
unit of food is ½ unit of clothing.
The process is similar for Japan. We know
that Japan can produce either combination C
(30 units of food and 120 units of clothing)
or combination D (0 units of food and 180
units of clothing). Suppose it is producing
combination D. What are the benefits and
costs of deciding to produce combination C
398 Chapter 15 International Trade and Economic Development instead? By producing combination C, Japan
will make itself better off by 30 additional
units of food, but it will have to give up 60
units of clothing to do so. In other words, for
every 1 extra unit of food, it will have to give
up 2 units of clothing. In economic terms,
for Japan, the opportunity cost of 1 unit of
food is 2 units of clothing. Thus the opportunity cost of producing 1 unit of food (F) is
½ unit of clothing (C) for the United States
and 2 units of clothing for Japan:
Opportunity cost of 1 unit of food
United States: 1F 1⁄ 2C
Japan: 1F 2C We conclude that the United States can
produce food more cheaply than Japan. In
other words, the United States has a comparative advantage in food production.
Food, then, is what the United States should
specialize in producing. If we followed this
procedure for clothing production, we
would find that Japan could produce clothing more cheaply than the United States.
The opportunity cost of producing 1 unit of
clothing is 2 units of food for the United
States and ½ unit of food for Japan.
Opportunity cost of 1 unit of clothing
United States: 1C 2F
Japan: 1C 1⁄ 2F Therefore, Japan has a comparative advantage in clothing production. Clothing, then, is
what Japan should specialize in producing.
E X A M P L E : Country A can produce
either (1) 40X and 20Y or (2) 80X and 0Y.
Country B can produce either (1) 20X and
20Y or (2) 40X and 0Y. What is the opportunity cost of producing 1X for both countries, A and B? To find it for country A, we
realize that when it goes from producing 40X
to 80X, it ends up not producing 20Y. So,
country A gets 40 more X at the cost of 20
fewer Y. In other words, for every 2 more X it
gets, it gives up 1Y. Or, to state it differently,
for every 1 more X it gets, it gives up ½Y. In
short, the opportunity cost of 1X is ½Y.
Now let’s look at things for country B.
When it goes from producing 20X to 40X it
gives up producing 20Y. In other words, to 15 (390-427) EMC Chap 15 11/18/05 9:12 AM Page 399 To Mow, or Clean,
?????????????????? F ourteen-year-old Steve and
twelve-year-old Danny are
brothers. Their father just told them
that each week they must complete
two tasks: clean their rooms and
mow the lawn. The following table
shows how many minutes it takes
each brother to do each task:
Time to clean
Danny Time to
mow lawn 100 minutes
100 minutes 60 minutes
120 minutes Although both Steve and Danny
take the same time to clean both
rooms, Danny is slower mowing the
lawn than Steve. For one, he takes a
lot more breaks when mowing the
lawn than Steve does.
Steve and Danny wonder how
they should go about doing what their father told them they need to
do. They realize they could each do
half of each task, or they could simply split the tasks and each do one.
Which is the better way to proceed?
Suppose each of the brothers
does half of each task. Steve spends
50 minutes on his half of cleaning
the rooms, and Danny spends 50
minutes, which is a total of 100
minutes to clean the rooms. Then
Steve spends 30 minutes mowing
his half of the lawn, and Danny
spends 60 minutes mowing, a total
of 90 minutes of mowing. To complete both tasks it takes 100 minutes plus 90 minutes, or 190
Now suppose that Steve only
mows the lawn (he specializes),
and Danny only cleans the rooms
(he specializes). It takes Steve 60
minutes to mow the lawn, and it
takes Danny 100 minutes to clean
the rooms, which is a total of 160
The choice is between 190 minutes or 160 minutes. To save time,
the brothers should do what each produce 20 more X, it must forfeit 20Y, or
for every 1 more X it has to give up 1Y. In
short, the opportunity cost of 1X is 1Y.
Who is the low-cost producer of X, country A or B? It is country A, because it gives
up less (½Y) to produce 1 more X. Benefits of Specialization
Suppose we look at two countries, Japan
and the United States. Currently, we assume
that each country can produce some food and has a comparative advantage in
doing, specialize in one task, and
get their duties completed 30 minutes faster, leaving them much
more time to do what they want.
ABOUT IT In many families, people have certain things
that they do and no one else does.
For example, a husband may cook
and the wife may wash the dishes;
a husband may mow the lawn and
the wife may wash the clothes. Do
you think the jobs that each family
member does are the result of comparative advantage or something
else? Explain your answer. some clothing. Here are the combinations of
the two goods that each country...
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