Answered: 6. Comparative advantage Jake and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Jake and Latasha are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the land and alfalfa on the rest.

On the following graph, use the blue line (circle symbol) to plot Jake's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Latasha's PPF.

Jake's opportunity cost of producing 1 bushel of alfalfa is ? bushels of barley, whereas Latasha's opportunity cost of producing 1 bushel of alfalfa is ? bushels of barley.

Because Jake has a (higher, lower) opportunity cost of producing alfafa than Latasha, (Jake, Latasha) has a comparative advantage in the production of alfafa, and (Latasha, Jake) has acomparactive advantage in the production of barley.

6. Comparative advantage
Jake and Latasha are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can
produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the
land and alfalfa on the rest.
Jake
Latasha
ALFALFA (Bushels)
200
On the following graph, use the blue line (circle symbol) to plot Jake's production possibilities frontier (PPF), and use the purple line (diamond symbol)
to plot Latasha's PPF.
180
160
140
120
100
80
60
40
20
0
0
Barley
(Bushels per acre)
10
40
100
200
Alfalfa
(Bushels per acre)
5
8
Because Jake has a
alfalfa, and
300 400 500 600 700 800 900 1000
BARLEY (Bushels)
Jake's opportunity cost of producing 1 bushel of alfalfa is
alfalfa is
bushels of barley.
Jake's PPF
Latasha's PPF
(?)
bushels of barley, whereas Latasha's opportunity cost of producing 1 bushel of
opportunity cost of producing alfalfa than Latasha,
has a comparative advantage in the production of barley.
has a comparative advantage in the production of

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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