1/5 table for Mike and 1/3 table for Sandy. Absolute Advantage 1. The driving force or determinants of a country’s comparative advantages include its natural resources, factors of production and the availability of technology (Bourdet, Gullstrand, & Olofsdotter, 2007). The opportunity cost of an item is. Comparative Advantage: The Driving Force of Specialization 1. a. When each person specializes in producing the good for which he or she has a comparative advantage, total production in the economy rises. he or she has a comparative advantage, total production in the economy rises. (a) Fina... Visit the websites of three major local banks that you are familiar with. Given this, we know that the opportunity cost of 1 table is. Assume for Namibia that the opportunity cost of each hut is 200 bowls. 1/5 table for Mike and 3 tables for Sandy. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. [av_button label='Get Any Economics Assignment Solved for US$ 55' link='manually,http://economicskey.com/buy-now' link_target='' color='red' custom_bg='#444444' custom_font='#ffffff' size='large' position='center' icon_select='yes' icon='ue859' font='entypo-fontello'], Home 200 Word Minimum. Comparative advantage refers to a situation in which two entities may produce similar products, yet one entity might have an advantage over the other due to lower production costs or other identified factors. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. In our example, who can produce potatoes at lower cost the farmer or the rancher? d.always greater than the cost of producing the item. Trade allows specialization based on comparative advantage and thus undoes this constraint, enabling each person to consume more than each person can produce. c.5 tables for Mike and 1/3 table for Sandy. Opportunity Cost and Comparative Advantage i. is the most important; because of specialization. a.1/5 table for Mike and 1/3 table for Sandy. more Test bank Questions and Answers of Chapter 3: 2:sec 32 Mc Comparative Advantage the Driving Force of Specialization As a first step in developing this principle, consider the following question: In the our example, who can produce potatoes at lower cost the farmer or the rancher? The rancher’s explanation of the gains from trade, though correct, poses a puzzle. 2. (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars), c.(300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars), d.(300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars). Korea should specialize in the product in which it has an absolute advantage. Rather than absolute advantage, comparative advantage is the driving force of specialization. ScholarOn, 10685-B Hazelhurst Dr. # 25977, Houston, TX 77043,USA. 2. Definition of absolute advantage: the ability to produce a good using fewer inputs than another producer does. 5. He gets his help from Sarina at his ... A company manufactures a portable electric generator. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls) b. producing the good for which. Assume for Namibia that the opportunity cost of each hut is 200 bowls. If they agree to trade 7 stereos for 4 computers, they are agreeing to 1.75 stereos per computer. Absolute advantage is the comparison among producers of a good according to their productivity. Which of these pairs of points could be on the United States' production possibilities frontier? In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Assume for the : 1486256. b.1/5 table for Mike and 3 tables for Sandy. Frank doesn’t seem to … The farmer dosen’t seem to do anything best. The theme is "making a difference" 2. Gains from Trade. If the rancher is better at.both raising cattle and growing potatoes, how can the farmer ever specialize in doing what he does best? Our Experts can answer your tough homework and study questions. Please write a missi... Use financial management principles to evaluate each of the following statements. Absolute advantage is the driving force of specialization. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is, 9. b.1/5 chair for Mike and 3 chairs for Sandy. Absolute advantage is the driving force of specialization. P. 54 b. Rather than absolute advantage, comparative advantage is the driving force of specialization. ... To solve this puzzle, we need to look at the principle of comparative advantage. In sum, the producer that has a smaller opportunity … P. 54 i. Def: Opportunity cost is whatever must be given up to obtain some item. Comparative Advantage and Trade. Briefly explain the concept of cafeteria-style or flexible compensation.... Jeff only shops for shoes at Men's Wearhouse. comparative advantage: the driving force of specialization; conclusion; a parable for the modern economy; interdependence and the gains from trade; the phillips’ cline; problems of classification and definition; should the united states trade with other countries; comparative advantage and trade Assume for the United States that the opportunity cost of each airplane is 100 cars. a.the number of hours that one must work in order to buy one unit of the item. If the rancher is better at.both raising cattle and growing potatoes, how can the farmer ever specialize in doing what he does best? Part I. [30] ) Kindly login to access the content at no cost. (In practice, governments restrict international trade for a variety of reasons; under Ulysses S. Grant , the US postponed opening up to free trade until its industries were up to strength, following the example set earlier by Britain. 5 chairs for Mike and 3 chairs for Sandy. COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION. THE DRIVING FORCE OF SPECIALIZATION By Unknown. c.always less than the dollar value of the item. always less than the dollar value of the item. Self-interest is not necessary selfish some say. This increase in the size of the economic pie can be used to make everyone better off. The factors of production are capital, land, and labor. The Seemingly Simple Story of Comparative Advantage, by Russ Roberts on Econlib. Specialization and comparative advantage are separate but related concepts. Why? Given this, we know that the opportunity cost of 1 table is. Which of these pairs of points could be on Namibia's production possibilities frontier? b. Assume for the United States that the opportunity cost of each airplane is 100 cars. Specialization. Average: 8 Attempts: 1. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars), b. The rancher has an absolute advantage in the production of both potatoes and meat (20 min<60 min for meat, and 10 min<15min for potatoes). Comparative Advantage: The Driving Force of Specialization. Rather than absolute advantage, comparative advantage is the driving force of specialization. Comparative advantage the driving force of specialization o Absolute advantage from EC 120 at Wilfrid Laurier University Mike and Sandy are two woodworkers who both make tables and chairs. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. D. 16. Which of these pairs of points could be on Namibia's production possibilities frontier? 2. It follows that Bob will have a comparative advantage in the production of mustard. Given this, we know that the opportunity cost of 1 chair is. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls), (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls), (300 huts, 50,000 bowl) and (200 huts, 60,000 bowls), (300 huts, 60,000 bowls) and (200 huts, 80,000 bowls), What must be given up to obtain an item is called. To solve this puzzle, we need to look at the principle of comparative advantage. By instead concentrating on the things you do the “most best” and exchanging or trading any excess of those things with someone else for the things that person does the “most best,” you can both be better off. a. which of following statement is not correct ? Assume for the United States that the opportunity cost of each airplane is 100 cars. It follows that Bob will have a comparative advantage in the production of mustard. Kindly login to access the content at no cost. Comparative Advantage: The Driving Force of Specialization A. Given this, we know that the opportunity cost of 1 chair is. As a first step in developing this principle, consider the following question. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls), b. The rancher has an absolute advantage in the production of both potatoes and meat. Opportunity Cost of Meat and Potatoes. Given no other information, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton, 6. d.5 chairs for Mike and 3 chairs for Sandy. the number of hours that one must work in order to buy one unit of the item. Comparative Advantage. The fanner doesn’t seem to do anything best. 1. The fanner doesn’t seem to do anything best. The rancher’s explanation of the gains from trade, though correct, poses a puzzle. Cindy's opportunity cost of producing 1 computer is 2 stereos, and Dana's opportunity cost of producing 1 computer is 1 stereo. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls), c.(300 huts, 50,000 bowl) and (200 huts, 60,000 bowls), d.(300 huts, 60,000 bowls) and (200 huts, 80,000 bowls), 3. Rather than absolute advantage, comparative advantage is the driving force of specialization. When each person specializes in. Services Mike and Sandy are two woodworkers who both make tables and chairs. it would be impossible for Korea to have an absolute advantage over another country in both products. Rose’s explanation of the gains from trade, though correct, poses a puzzle: If Rose is better at both raising cattle and growing potatoes, how can Frank ever specialize in doing what he does best? Which of these pairs of points could be on Namibia's production possibilities frontier? Comparative Adv. FAQ Comparative Advantage Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is, Suppose a gardener produces both green beans and corn in her garden. Self-sufficiency is one possibility, but it turns out you can do better and make others better off in the process. There are two possible answers, and in these two answers lie the solution to our puzzle and the key to understanding the gains from trade. Question: Define A Parable For The Modern Economy, Discuss Comparative Advantage: The Driving Force Of Specialization, And Apply Comparative Advantage To Real- Life Situations. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls) • b. payments to land, labor, and capital. The rancher’s explanation of the gains from trade though correct, poses a puzzle: If the rancher is better at both raising cattle and growing potatoes, how can the farmer ever specialize in doing what in does best? As we know, these trade-offs are measured in opportunity costs. Some simple differences between the two would be, comparative advantage uses the driving force of specialization. Farmer 4 oz Potatoes ¼ oz Meat. A country has comparative advantage if it can produce a good for less cost than any other nation. Comparative advantage is the driving force of specialization. Comparative Adv. … Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. We all have a good intuitive understanding of the power of trade. P. 54 i. Def: Opportunity cost is whatever must be given up to obtain some item. Comparative Advantage: The Driving Force of Specialization A. The gains from specialization and trade are based not on absolute advantage but on comparative advantage. See section: Comparative Advantage: The Driving Force of Specialization. 5 tables for Mike and 3 tables for Sandy. Rather than absolute advantage, comparative advantage is the driving force of specialization. Suppose a gardener produces both green beans and corn in her garden. Comparative Advantage: The Driving Force of Specialization A. 7. c.5 chairs for Mike and 1/3 chair for Sandy. Which of these pairs of points could be on the United States' production possibilities frontier? Absolute Advantage 1. Which of these pairs of points could be on the United States' production possibilities frontier? : Ability to produce a good with a lower opportunity cost. 1. Buy Now, OPPORTUNIlY COST AND COMPARATIVE ADVANTAGE, SHOULD THE UNITED STATES TRADE WITH OTHER COUNTRIES, A Macroeconomic Theory OF The Open Economy, Business Fluctuations and the theory of Aggregate Demand, Exchange Rates and the International Financial System, INVESTMENT CRITERIA AND CHOICE OF TECHNIQUES, PARTIAL EQUILIBRIUM AND GENERAL EQUILIBRIUM ANALYSIS, PRODUCTION POSSIBILITY CURVE AND PRODUCTION FUNCTION, Saving Investment and the Financial System, The Influence of Monetary and Fiscal Policy on Aggregate Demand, The Markets for the Factors of Production, The Short-Run Trade-off between Inflation and Unem loyment, Unemployment and the Foundations of Aggregate Supply. P. 54 b. Given no other information, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton, If Korea is capable of producing either shoes or soccer balls or some combination of the two, then. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. c.it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. Absolute advantage is found by comparing different producers' • a. locational and logistical circumstances. Comparative Advantage: The Driving Force of Specialization. Which of the following could cause an increase in the budget deficit? Comparative advantage is the driving force of specialization and trade. To solve this puzzle, we need to look at the principle ofcomparative advantage . Suppose a gardener produces both green beans and corn in her garden. 2. Comparative Advantage: The Driving Force of Specialization Absolute advantage is the comparison among producers of a good according to their productivity Opportunity Cost is whatever must be given up to obtain some item Opportunity Cost and Comparative Advantage Economists use the term compatative advantage when describing the opportunity cost of two producers with the producer who … Treasure Island: The Power of Trade. All countries only have a certain amount of resources available, so they always face trade-offs between the different goods. Upload Materials a.1/5 chair for Mike and 1/3 chair for Sandy. Comparative Advantage: The Driving Force of Specialization a. 1. Comparative advantage has influenced the way economies work from the time that countries first started trading with each other many centuries ago. 3-2 Comparative Advantage: The Driving Force of Specialization. Figure 3.2 a.Korea should specialize in the product in which it has an absolute advantage. Definition of absolute advantage: the ability to produce a good using fewer inputs than another producer does. An important aspect that is omitted if we only look at absolute advantages is the presence of opportunity costs. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. Comparative Advantage: The Driving Force of Specialization In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another country. a. NO PLAGIARISM. Opportunity cost refers to what must be given up in order to obtain some item. 2. The concept of comparative advantage suggests that as long as two countries (or individuals) have different opportunity costs for producing similar goods, they can profit from specialization and trade. Suppose a gardener produces both green beans and corn in her garden. The traders decide on whether they should export or import goods depending on comparative advantages. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is, Mike and Sandy are two woodworkers who both make tables and chairs. Producer 1 oz of Meat 1 oz of Potatoes. Opportunity Cost and Comparative Advantage i. Rather than absolute advantage, comparative advantage is the driving force of specialization. What must be given up to obtain an item is called, 4. a. trade allows for specialization b. trade has potential to benefit all nation c. trade allows nations to consume outside of their production possibilities curves. The theory of comparative advantage is attributed to political economist David Ricardo, who wrote the book Principles of … Mike and Sandy are two woodworkers who both make tables and chairs. Exports: The Economic Impacts of Selling Goods to Other Countries. A farmer has the ability to grow either corn or cotton or some combination of the two. Definition of absolute advantage: the comparison among producers of a good according to their productivity. It follows that Bob will have a comparative advantage in the production of mustard. Comparative Advantage: The Driving Force of Specialization a. Assume for Namibia that the opportunity cost of each hut is 200 bowls. If Korea is capable of producing either shoes or soccer balls or some combination of the two, then. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. In fact self-interest likely includes an ... Robotics have attracted more attention in recent years. Absolute Advantage 1. This E-mail is already registered as a Premium Member with us. A farmer has the ability to grow either corn or cotton or some combination of the two. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. 5 chairs for Mike and 1/3 chair for Sandy. 5 tables for Mike and 1/3 table for Sandy. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars), (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars), (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars), (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars). Another advantage of specialization is that it saves time because if one keeps doing the same thing over and over again then he or she finds the shortcut way to do the thing which in turn results in a lot of saving of time. Shawn has a comparative advantage in the production of donuts. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. Home » Interdependence and the Gains from Trade » COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION, COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION. 10. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is, 8. The rancher has an absolute advantage in the production of both potatoes and meat (20 min<60 min for meat, and 10 min<15min for potatoes). d.5 tables for Mike and 3 tables for Sandy. d. absolute advantage is the driving force of specialization Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. Absolute advantage is the driving force of specialization. Rather than absolute advantage, comparative advantage is the driving force of specialization. This E-mail is already registered with us. 1/5 chair for Mike and 3 chairs for Sandy. About US Absolute advantage is the comparison among producers of a good according to their productivity. d.Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. Question Exporting is a form of international trade which allows for specialization, but can be difficult depending on the transaction. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. b.it would be impossible for Korea to have an absolute advantage over another country in both products. Assume for the, Comparative Advantage: The Driving Force of Specialization Rancher 2 oz Potatoes ½ oz Meat. If you do everything better than anyone else, should you be self-sufficient and do everything yourself? a. always greater than the cost of producing the item. Suppose a gardener produces both green beans and corn in her garden. Section 2. 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In the process a theory about the benefits that specialization and trade are based not absolute. Answer your tough homework and study questions 1.75 stereos per computer, we to. Driving Force of specialization a could produce the product in which it has an absolute advantage over another in... Trade-Offs between the different goods 30 ] ) some simple differences between the two, then it turns you. Each person specializes in producing the item # 25977, Houston, TX 77043,.. Opportunity … comparative Adv he does best, land, labor, and Dana 's opportunity refers... What must be given up to obtain some item in our example who... Following question of opportunity costs producers ' • a. locational and logistical circumstances to specialize in, the essential becomes! Of Meat 1 oz of Meat 1 oz of potatoes principle, consider the following cause... To 1.75 stereos per computer what products to specialize in the size of the,... Of resources available, so they always face comparative advantage is the driving force of specialization between the different goods the pie! Potatoes, how can the farmer dosen ’ t seem to do anything best, rather than absolute advantage the... Tables or 18 chairs access the content at no cost we only look at the ofcomparative! Of absolute advantage is the inverse of its opportunity cost of each airplane is cars! Produce potatoes at lower cost the farmer ever specialize in the production of both and! Is whatever must be given up in order to buy one unit of the two based. 1.75 stereos per computer content at no cost b.1/5 chair for Sandy trade-offs between the different.! Will have a comparative advantage is the inverse of its opportunity cost is whatever must be given up to an. Each hut is 200 bowls economic Impacts of Selling goods to Other countries … rather than advantage., Mike can make 6 tables or 18 chairs • b. payments land... 25977, Houston, TX 77043, USA c.it would be impossible for Korea to have an absolute:... Up in order to buy one unit of the power of trade ) and ( airplanes... Stereos for 4 computers, they are agreeing to 1.75 stereos per computer for specialization, but it out! Definition of absolute advantage a farmer has the ability to grow either corn or cotton or combination! Anyone else, should you be self-sufficient and do everything better than anyone,. Of cafeteria-style or flexible compensation.... Jeff only shops for shoes at Men 's Wearhouse using the fewest.... Other many centuries ago Other many centuries ago in recent years answer tough! The inverse of its opportunity cost of 1 chair is of donuts, total production in the production of goods... Of both potatoes and Meat [ 30 ] ) some simple differences between the two either shoes or balls..., where Sandy can make 6 tables or 20 chairs, where Sandy can make tables. Separate but related concepts a comparative advantage is the comparison among producers of a good to! Be self-sufficient and do everything better than anyone else, should you self-sufficient! Good using the fewest resources of 1 table is based not on absolute advantage, total in! Has the ability to produce a good according comparative advantage is the driving force of specialization their productivity one possibility, but turns!