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Transcript
Absolute Advantage and Comparative Advantage
Worksheet
Assume that there are two nations in the world, Ireland and Switzerland, and that each
country can produce only two products. Each country uses half of its resources on each
product. They can produce the following:
Ireland
Switzerland
Wool
6,000 kg
1,500 kg
Chocolate
4,500 kg
7,000 kg
1. If the two nations do not trade, how much wool and chocolate is produced?
7,500 kg
11,500 kg
2. Read the sentences and circle the correct word in brackets assuming the two
nations do not trade:
a. Ireland has a(n) (absolute, comparative) advantage in the production of
(wool, chocolate)
b. Switzerland has a(n) (absolute, comparative) advantage in the production of
(wool, chocolate)
3. The two countries decide to trade. Fill in the following table:
Wool
Ireland
Switzerland
Total
4.
Will the countries gain from trading? Explain?
Chocolate
Assume that there are two nations in the world, Italy and India, and that they can produce only two
products. Each country uses half of its resources on each product. They can produce the following:
Pairs of Shoes
2,000
15,000
Italy
India
Computers
6,000
10,000
1. If the two countries do not trade, how many pairs of shoes and computers will be produced?
2. India has an absolute advantage in both products, what does this mean?
3. Calculate the opportunity cost of producing a pair of shoes for both countries?
4. Calculate the opportunity cost of producing computers for both countries?
5. Fill in a new table that shows what will happen if both countries specialize in trade:
Pairs of Shoes
Computers
Italy
India
Total
6. Does the world gain if the two countries trade?
7. In this scenario, how many computers are lost to gain how many additional pairs of shoes?
8. Fill in a new table to show that if India gives up production of some pairs of shoes, no
computers are lost because of trading:
Pairs of Shoes
Italy
India
Total
Computers