# AP Macro 1.05: Comparative Advantage

Satisfactory Essays
Question One
A. Wanda: The opportunity cost of producing 1 basket is 1/5 of a hat. The opportunity cost for producing 1 hat is 5 baskets.

B. Carl: The opportunity cost for producing 1 basket is 3/5 of a hat. The opportunity cost for producing 1 hat is 5/3 baskets.

C. In this case, Wanda has the comparative advantage in producing baskets because she only gives up 1/5 of a hat produce 1 basket while Carl must give up 3/5 hat to produce 1 basket. Carl, however, has the comparative advantage in hat production because he only gives up 5/3 baskets to produce 1 hat which is less than the 5 baskets that Wanda needs to give up to produce 1 hat.

Question Two The production possibilities frontiers above show the production possibilities for two goods produced in the Macro and Micro Islands using the same resources. From these curves, we can determine that

the Macro Islands have an comparative advantage in producing sun glasses.

Question Three
Refer to the graph above of a country’s production possibilities curve. If three automobile tires are currently being produced, the opportunity cost of producing the fourth automobile tire would be

## You May Also Find These Documents Helpful

• Good Essays

4. Ezra runs a gyro stall at the local farmers' market. He would like to expand and open his own shop downtown. He has made the chart above, listing some potential costs and benefits of expansion. If Ezra decides not to expand, what will be an opportunity cost of his choice?…

• 488 Words
• 3 Pages
Good Essays
• Good Essays

Q3) Apples, oranges, and peaches are the same price. In descending order, Joe’s favorite fruits are apples, oranges, and peaches. If Joe buys an apple, the opportunity cost for him is a(n)...…

• 2232 Words
• 9 Pages
Good Essays
• Satisfactory Essays

| If each case sells for \$5 more than the cost of the materials used in producing it, then the value marginal product for the 2nd worker is A.…

• 670 Words
• 3 Pages
Satisfactory Essays
• Good Essays

For Year One, to calculate the baskets cost, you would do the Price of X times the quantity of X plus the Price of Y times the Quantity of Y plus the Price of Z times the Quantity of Z.…

• 583 Words
• 3 Pages
Good Essays
• Better Essays

Problem #1: Using either a graph or table (Refer to page 22 for help with graphs and tables) use two goods to construct a production possibilities curve. Clearly explain what a variety of different points on the curve mean. What would make the curve expand or contract? Why is efficiency lost at the extremes, as when substantially more of one good and very little of another is produced?…

• 1474 Words
• 6 Pages
Better Essays
• Good Essays

h. Trade-offs facing an economy that produces only two goods showing the quantity of one good that can be produced with available resources and technology for any given production of the other. 8. Production…

• 646 Words
• 3 Pages
Good Essays
• Satisfactory Essays

3. What is the opportunity cost of increasing the annual output of corn from 800 to 1000 pounds?…

• 309 Words
• 2 Pages
Satisfactory Essays
• Good Essays

11. Sue can produce 4 dozen cookies or 2 dozen cupcakes in one hour. David can produce 6 dozen cookies or 4 dozen cupcakes in one hour. Sue 's opportunity cost of 1 dozen cookies is? 2 dozen cupcakes and David 's opportunity cost of 1 dozen cookies is 1. 5 dozen cupcakes, 2 dozen cupcakes and David 's opportunity cost of 1 dozen cookies is 2/3 dozen cupcakes.…

• 998 Words
• 4 Pages
Good Essays
• Satisfactory Essays

The opportunity cost of increasing the annual output of corn from 200 to 400 is 75lbs of poultry.…

• 428 Words
• 2 Pages
Satisfactory Essays
• Good Essays

Monroe Clock Company has been making decorative electric clocks and later switched to making electric timing mechanisms for producers of timed electrical appliances. Monroe is interested in making a new timer, but they have to decide if the costs will be reasonable enough to deal with and still make profit. Monroe tried calculating its costs for the new timer. Unfortunately, they come up with high production costs, which could lead to consumers not willing to buy the item. The company has to decide how costs will be allocated and what price to charge consumers. This decision has to be done carefully or Monroe could end up making no profit.…

• 571 Words
• 3 Pages
Good Essays
• Satisfactory Essays

4b. Assuming that she wishes to maximize expected contribution, how many sweaters should Jacobson order?…

• 297 Words
• 2 Pages
Satisfactory Essays
• Better Essays

From the Production Possibilties curve, we can assume that more T-shirts mean fewer knitting machines because to produce more units of t-shirts, more units of knitting machines have to be compromised. As we move along from points A to E, we realize an important economic principle- the law of increasing opportunity cost. According to this law, the opportunity cost of each additional unit of…

• 1292 Words
• 6 Pages
Better Essays
• Powerful Essays

Suppose you can purchase milk for \$3 a gallon or eggs for \$1.50 per dozen. Your opportunity cost of a gallon of milk is:…

• 4858 Words
• 20 Pages
Powerful Essays
• Good Essays

2. Dog Cove Knitworks (DCK) is a new company that will produce hand-knit sweaters. Each of the company’s six partners has designed three different sweaters. They have made up samples of each design and have determined that, on average, the sweaters each take about seven hours to knit. Materials cost per sweater average \$19. The partners have decided that initially they will work for only \$8 per hour, in anticipation of reasonable profits in the future. They intend to sell the sweaters directly to consumers through craft fairs. They have budgeted \$7,000 to cover the various costs associated with participation in craft fairs (book rental, display costs, travel expenses, etc).…

• 932 Words
• 4 Pages
Good Essays
• Good Essays

An individual, a firm, a region, or a county may develop an area of specialization naturally, but frequently choices must be made to determine what to produce for exchange or trade.…

• 500 Words
• 2 Pages
Good Essays