PAnoPage 58. Pat and Kerry are considering a partnership. With all Pat's resources, Pat can produce 50 X or20 Y. With all of Kerry's resources, Kerry can produce 30 X or 30 Y. Assume theresources can be easily substituted to make either product. They are starting by using halfof the resources to make each item. These relationships are shown in the following table. Usethis information to answer the following questions:KerryProduct X(Xylophones)Product Y(Yams)500Pat25Pat make?10020Pat make?3001515030a. Who has an absolute advantage in producing X? Patb. Who is a comparative advantage in producing Y?Partnershipbe gained from before they started trading?c. If Pat and Kerry decided to take all the gains from trade in X, how much X would4025d. If Pat and Kerry decided to take all the gains from trade in X, how much X wouldGainbe gained from before they started trading?e. If Pat and Kerry decided to take all the gains from trade in Y, how much Y wouldf. If Pat and Kerry decided to take all the gains from trade in Y, how much y would

Pat and Kerry are considering a partnership.With all Pat's resource’s, Pat can produce 50 X or 20…

Product X (Xylophones) Product Y (Yarns) 50 0 Wer the following questions: Pat Pat make? 25 10 0 Pat make? 30 20 0 Kerry 15 15 30 a. Who has an absolute advantage in producing X? Pati 0 b. Who is a comparative advantage in producing Y? Partnership be gained from before they started trading? c. If Pat and Kerry decided to take all the gains from trade in X, how much X would 40 25 d. If Pat and Kerry decided to take all the gains from trade in X, how much X would Gain be gained from before they started trading? e. If Pat and Kerry decided to take all the gains from trade in Y, how much Y would f. If Pat and Kerry decided to take all the gains from trade in Y, how much Y would

Product X (Xylophones) Product Y (Yarns) 50 0 Wer the following questions: Pat Pat make? 25 10 0 Pat make? 30 20 0 Kerry 15 15 30 a. Who has an absolute advantage in producing X? Pati 0 b. Who is a comparative advantage in producing Y? Partnership be gained from before they started trading? c. If Pat and Kerry decided to take all the gains from trade in X, how much X would 40 25 d. If Pat and Kerry decided to take all the gains from trade in X, how much X would Gain be gained from before they started trading? e. If Pat and Kerry decided to take all the gains from trade in Y, how much Y would f. If Pat and Kerry decided to take all the gains from trade in Y, how much Y would

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Comparative Advantage and Absolute Advantage Analysis

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

Question

PA
no
Page 5
8. Pat and Kerry are considering a partnership. With all Pat's resources, Pat can produce 50 X or
20 Y. With all of Kerry's resources, Kerry can produce 30 X or 30 Y. Assume the
resources can be easily substituted to make either product. They are starting by using half
of the resources to make each item. These relationships are shown in the following table. Use
this information to answer the following questions:
Kerry
Product X
(Xylophones)
Product Y
(Yams)
50
0
Pat
25
Pat make?
10
0
20
Pat make?
30
0
15
15
0
30
a. Who has an absolute advantage in producing X? Pat
b. Who is a comparative advantage in producing Y?
Partnership
be gained from before they started trading?
c. If Pat and Kerry decided to take all the gains from trade in X, how much X would
40
25
d. If Pat and Kerry decided to take all the gains from trade in X, how much X would
Gain
be gained from before they started trading?
e. If Pat and Kerry decided to take all the gains from trade in Y, how much Y would
f. If Pat and Kerry decided to take all the gains from trade in Y, how much y would

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ALS ISES V y tools ge Success Tips er Success Tips . SIGN OUT 18 W PPF Shenandoah has a comparative advantage in the production of production of . NNN ALMONDS (Ms of pounds) 3 ****** (spuned to su Shenandoah a comparative advantage. After specialization, the two countries can produce a total of or base Note: Dashed drop lines will automatically extend to both aves. 41 Suppose that Shenandoah and Congaree agree to trade. Each country focuses es resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 8 million pounds of almonds for 8 milion pounds of basil. This ratio of goods is known as the price of trade between Shenandoah and Congaree. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol)on the graph to indicate Shenandoah's consumption after trade. 16 true 4 False 44 Shenandoah 24 12 ALMONOS (MAons of pounds) 41 40 45 while Congaree has a…