2. Comparative and absolute advantage Larry and Megan are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of corn and rye each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye the rest. Corn Rye (Bushels per acre) (Bushels per acre) Larry 40 8 Megan 28 7 On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Megan's PPF. (?) 200 180 160 140 120 100 80 60 40 20 0 has an absolute advantage in the production of rye. bushels of corn, whereas Megan's opportunity cost of producing 1 bushel of rye is opportunity cost of producing rye than Megan, has a comparative RYE (Bushels) 0 100 200 300 400 500 600 700 800 900 1000 CORN (Bushels) has an absolute advantage in the production of corn, and Larry's opportunity cost of producing 1 bushel of rye is bushels of corn. Because Larry has a advantage in the production of rye, and Larry's PPF Megan's PPF has a comparative advantage in the production of corn.

2. Comparative and absolute advantage Larry and Megan are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of corn and rye each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing corn or rye or to produce corn on some of the land and rye the rest. Corn Rye (Bushels per acre) (Bushels per acre) Larry 40 8 Megan 28 7 On the following graph, use the blue line (circle symbol) to plot Larry's production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Megan's PPF. (?) 200 180 160 140 120 100 80 60 40 20 0 has an absolute advantage in the production of rye. bushels of corn, whereas Megan's opportunity cost of producing 1 bushel of rye is opportunity cost of producing rye than Megan, has a comparative RYE (Bushels) 0 100 200 300 400 500 600 700 800 900 1000 CORN (Bushels) has an absolute advantage in the production of corn, and Larry's opportunity cost of producing 1 bushel of rye is bushels of corn. Because Larry has a advantage in the production of rye, and Larry's PPF Megan's PPF has a comparative advantage in the production of corn.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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