Answered: If each person specialized according to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Productivity Table
	Soup per unit of labor	Swords per unit of labor
Wesley	30	25
Fezzik	10	30

If each person specialized according to comparative advantage and later decides to move 4 units of labor to comparative disadvantage, what would be the result?

Total soup production increases by 160, total sword production increases by 220

Total soup production decreases by 80, sword production increases by 220.

Total soup production decreases by 20, total sword production increases by 160

Total soup production increases by 80, total sword production decreases by 220

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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