Living A And B Produces Products X And Y

Absolute advantage is when an industry in a country can produce a product more than other countries with the same resources. Comparative advantage is when an industry in a country can make a product at a lower opportunity cost than other countries. Opportunity cost is when giving up the second best choice when making a decision.

A and B are partners sharing profits in the ratio 3:2 They admit C in to the partnership firm and C gets ¼ share calculate the sacrifice ratio.

1. Country A is extremely efficient in the mining of tin. However, its climate and terrain makes it difficult to produce corn. According to the theory of comparative advantage, Country A should:

Comparative advantage is the concept that production can be conducted with lower opportunity cost than a competitor. The lower cost of

18. __________ basic argument, articulated through the theory of absolute advantage, is that a country

Along budget line ZM, the price of X is $__30_ and the price of Y is $__20. 600/20=30 X= 600/30=20

mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:"Calibri","sans-serif";} A firm is using 500 units of capital and 200 units of labor to produce 10,000 units of output. Capital costs $100 per unit and labor $20 per unit. The last unit of capital added 50 units of output, while the last unit of labor added 20 units of output. The firm

Consider the production schedules for two fictional countries, Ying and Tai. Both countries can only produce two types of goods, Lychees and Teacups. The rows a to e depict the possible combinations of these two goods that each country can produce. Ying Number of Number of Lychees Teacups 0 12 2 Tai Number Lychees 4

Benoit Company produces three products, A, B, and C. Data concerning the three products follow (per unit).

| it is relatively more efficient at producing some but not all goods and services than another country.

This case is dealing with a ski apparel company called Sport Obermeyer. They are trying to figure out how much and where to produce their 1993-1994 line. However they seem to be running into a problem, they don’t know how much they should produce. They don’t want to produce too much and have left overs that they have to sell at a discounted rate. They also don’t want to not have enough for the demand. Another question was where should they do most of their production. In Hong Kong, workers were 50% faster than workers in China. Hong Kong also put their workers trained in many different areas. It would take 40 workers in China to complete a line versus 10. On the other hand, China’s minimum wage was much lower, $.16 per hour in US dollars. While Hong Kong minimum wage was $3.84 per hour.

The Comparative Advantage H-O theory; however, has trends that do resemble Brazils trading progression. The Heckscher-Ohlin Model of the Comparative Advantage states countries will export intensive use of locally abundant factors and will import intensive use of factors that are locally scarce. This means that they will produce more of a product that they are more efficient at producing and have the resources to produce it while they import the items that they cannot produce efficiently or do not have the proper environment to make. When a country can efficiently produce a product they have a “comparative advantage” which is based on factors of productions such as labor, land, and capital. This is because a country is capable of making more profit on goods that have low input cost. Goods that require inputs that are abundant are cheaper to produce than goods that require scarce resources. Brazil reflects this trade model excellently; their top exports are all resources found naturally in Brazil. They have large quantities of Iron and crude oil which make up their top two exports. In addition Brazil’s rich soils and tropical climate makes it easy for them to produce crops such as soybeans. As the number one producer of soybeans in the world they have very low inputs to produce soybeans

Where Xij is the export of country i, for, j commodity and n is a set of all exported commodities of country i, while Xwj represents the export of world for same commodity j and Xwn is a world export of all n commodities. According to the results of this index if RCA2 >1 then a country has a comparative advantage, if RCA2<1 then a country has a comparative disadvantage in that commodity or industry.

Using the same amount of resources to produce two goods. Draw PPF curve and explain the reason of each question.

Economists use the term absolute advantage when comparing the productivity of one person, firm or nation with that of another. The producer that requires a smaller quantity of inputs to produce a good is said to have an absolute advantage in producing that good (Gans, King, & Mankiw, 1999).