Comparative Advantage

In which case can Alphaland consume at point Z?

Alphaland can consume at point Z if it engages in specialization and trade.

Alphaland and Betaville both produce axes and batons. If they decide to specialize in producing the good in which they have the lower opportunity cost, total production will:

Increase

The production possibilities frontier represents:

All of the above a. The limit of an economy's production capabilities. b. Full employment. c. The resources available for producing goods and services.

Where can an economy produce?

Both a and b At any point inside its production possibilities frontier At any point on its production possibilities frontier

According to Tomato Town's production possibilities frontier:

Both a and c a. Points X and Y reflect combinations of pizza and pasta that can be produced by the economy. c. Point X reflects an economy that is not producing as much pizza and pasta as possible and Point Z is unattainable without changes in technology or additional resources.

What are Bryan's opportunity costs of completing each of these tasks?

Bryan gives up trimming 16 bushes for each ½ acre of grass he cuts, and he gives up cutting 1/4 acre for each 8 bushes he trims.

Who has the absolute advantage in the lawn care business?

Bryan has an absolute advantage in grass cutting and bush trimming

Jim: Cut 1/2 acre lawn in 3 hours and trims 8 bushes in 3 hours Bryan : Cut 1/2 acre lawn in 2 hours and trims 8 bushes in 1 hour Jim and Bryan operate a lawn care business. How would you suggest they divide grass cutting and bush trimming tasks?

Bryan should trim bushes and Jim should cut grass.

Which baker has the lower opportunity cost in decorating cookies?

Kendall

According to their comparative advantage:

Kendall should decorate cupcakes and Wilson should decorate cookies.

Leena and Susan both produce cupcakes. Leena's opportunity cost of producing cupcakes is lower than Susan's opportunity cost of producing cupcakes. Which of the following statements must be true?

Leena has a comparative advantage in producing cupcakes

Orchardland produces apples and oranges, at a combination on its production possibilities frontier (shown above). If the people decide to produce more apples:

Orchardland will have more apples and fewer oranges.

According to their comparative advantage, Alphaland specializes in axes and Betaville specializes in batons. Alphaland will trade axes for batons if:

The price of batons is lower than Alphaland's cost to produce batons.