2. Comparative and absolute advantageClancy and Eileen are farmers. Each one owns a 10-acre plot of land. The following table shows the amount of rye and corn each farmer can produceper year on a given acre. Each farmer chooses whether to devote all acres to producing rye or corn or to produce rye on some of the land and corn onthe rest.RyeCorn(Bushels per acre)(Bushels per acre)Clancy126Eileen204 10090Clancy's PPF807060Eileen's PPF504030201050100150200250300350400450500RYE (Bushels)Eileen v has an absolute advantage in the production of rye, and Clancy v has an absolute advantage in the production of corn.Clancy's opportunity cost of producing 1 bushel of corn is2 bushels of rye, whereas Eileen's opportunity cost of producing 1 bushel of corn is5 bushels of rye. Because Clancy has a lower ▼ opportunity cost of producing corn than Eileen, Clancy v has a comparativeadvantage in the production of corn, andv has a comparative advantage in the production of rye.CORN (Bushels)

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Description: 2. Comparative and absolute advantageClancy and Eileen are farmers. Each one owns a 10-acre plot of land. The following table shows the amount of rye and corn each farmer can produceper year on a given acre. Each farmer chooses whether to devote all

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Eileen has an absolute advantage in the production of rye, and Clancy has an absolute advantage in the production of corn. 2 bushels of rye, whereas Eileen's opportunity cost of producing 1 bushel of corn is opportunity cost of producing corn than Eileen, Clancy ▼ has a comparative Clancy's opportunity cost of producing 1 bushel of corn is 5 bushels of rye. Because Clancy has a lower advantage in the production of corn, and has a comparative advantage in the production of rye.

Eileen has an absolute advantage in the production of rye, and Clancy has an absolute advantage in the production of corn. 2 bushels of rye, whereas Eileen's opportunity cost of producing 1 bushel of corn is opportunity cost of producing corn than Eileen, Clancy ▼ has a comparative Clancy's opportunity cost of producing 1 bushel of corn is 5 bushels of rye. Because Clancy has a lower advantage in the production of corn, and has a comparative advantage in the production of rye.

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Chapter1: Making Economics Decisions

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Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

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2. Comparative and absolute advantage
Clancy and Eileen are farmers. Each one owns a 10-acre plot of land. The following table shows the amount of rye and corn each farmer can produce
per year on a given acre. Each farmer chooses whether to devote all acres to producing rye or corn or to produce rye on some of the land and corn on
the rest.
Rye
Corn
(Bushels per acre)
(Bushels per acre)
Clancy
12
6
Eileen
20
4

100
90
Clancy's PPF
80
70
60
Eileen's PPF
50
40
30
20
10
50
100
150
200
250
300
350
400
450
500
RYE (Bushels)
Eileen v has an absolute advantage in the production of rye, and Clancy v has an absolute advantage in the production of corn.
Clancy's opportunity cost of producing 1 bushel of corn is
2 bushels of rye, whereas Eileen's opportunity cost of producing 1 bushel of corn is
5 bushels of rye. Because Clancy has a lower ▼ opportunity cost of producing corn than Eileen, Clancy v has a comparative
advantage in the production of corn, and
v has a comparative advantage in the production of rye.
CORN (Bushels)

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