02 comparative advantage PPT

24 nuts poundday 154902 14 with specialization and

Info iconThis preview shows page 1. Sign up to view the full content.

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

Unformatted text preview: − 8 4 4 8 12 16 20 24 Nuts (pound/day) 0 4 8 12 16 20 24 Nuts (pound/day) 15:49:02 14 With Specialization and Trade Opportunity costs of the productions of Susan and Tom: Suppose that now Tom specializes completely by allocating all 6 hours to picking Nuts (lower OC), and Susan specializes completely by allocating all 6 hours to picking Coffee (lower OC), . Susan Opportunity cost of 1 pound of Coffee ½ lb Nut 2 lb Coffee Susan’s production : 24 pound Coffee Tom’s production : 24 pound Nuts Tom 2 lb Nuts ½ lb Coffee Suppose that Tom trades 12 pound Nuts with Susan in return for 12 pound Coffee. low-cost Opportunity cost of 1 pound of Nut low-cost 15:49:02 15 Coffee Susan's PPF 20 16 15:49:02 Two countries – the U.S. and Mexico Consumption with trade Two goods – T shirts and computers 12 Tom's PPF 8 4 One input factor – workers 0 4 8 12 16 20 24 16 Cowen, Tyler, and Alex Tabarrok, 2011, Modern Principles: Microeconomics, 2nd edition. New York: Worth Publishers, pp. 17: Both individuals are better off No Trade Production = Consumption 24 Tom’s consumption : 12 lb coffee + 12 lb nuts Susan’ consumption : 12 lb coffee + 12 lb nuts (3) Comparative advantage Consumption of the individuals with Trade: 15:49:02 1 2 4 0 15:49:02 Consumption with trade 12 8 6 hours No Trade Production = Consumption 24 16 16 12 4 lbs Tom's PPF No Trade Production = Consumption 24 the Model Nuts (pound/day) 17 15:49:02 18 3 (3) Comparative advantage Productivity in Mexico: the Model 12 × = 2× = Without Trade Mexico’s consumption : 1...
View Full Document

Ask a homework question - tutors are online