Monday, September 27th, 2010

Reminder AP Micro Students: You have a quiz on PPFs, comparative and absolute advantage on Wednesday!  I will be available after school on Monday from 2-3:30 and on Tuesday from 2:30-3:30 for anyone who would like extra help.

Answers to handout entitled, “Practice Problems: Production Possibilities and Trade” (what you were working on in class):

1. a. Wheat: neither,  Cloth: Country B because it can produce 300 yards of cloth, and Country A can only produce 100 yards of cloth.

b. Country A has the comparative advantage in wheat, Country B has the comparative advantage in cloth.

c. Country B should import wheat because it produces (and will export) cloth.

d. Country B is importing wheat.  Since two yards of cloth is less than Country B’s opportunity cost of producing wheat (3 yards of cloth), Country B gains from trade.

2. Absolute advantage shows who has the ability to produce using the least amount of inputs (or greater amount of outputs).  Comparative advantage shows who has the ability to produce using the lower opportunity cost.  Use comparative advantage for determining trade patterns.

SKIP # 3.

4. THIS IS AN IB PROBLEM.  Given that Diane has the comparative advantage in calculations, and it takes Diane 12 hours to complete the calculations, it will take 12 hours to complete calculations.  Given that Gary has the comparative advantage in slides, and it takes Gary 10 hours to complete the slides, it will take 10 hours to complete the slides.  The total amount of hours to complete the project is 22 hours.

Answers to the Multiple Choice and True/False homework assignment:

1. D

2. A

3. D

4. A

5. D

6. A

7. C

8. B

9. C

10. SKIP

11. A

12. D

13. A

14. B

15. C

16. A

17. False (absolute should be comparative)

18. False (absolute should be comparative)

19. True

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