When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than itstrading partner. Then the country will specialize in the production of this good and trade it for other goods.The following graphs show the production possibilities frontiers (PPFs) for Glacier and Denali. Both countries produce corn and pistachios, each initially(i.e., before specialization and trade) producing 18 million pounds of corn and 9 million pounds of pistachios, as indicated by the grey stars markedwith the letter A.PISTACHIOS (Millions of pounds)48423630241812600PPF6GlacierA12 18 24 3036CORN (Millions of pounds)4248?PISTACHIOS (Millions of pounds)48423630241812600PPF+6Denali1218 24 30 36CORN (Millions of pounds)4248 Glacier has a comparative advantage in the production ofproduction ofSuppose that Glacier and Denali specializecomparative advantage. After specialization, the two countries can produce a total ofof corn..while Denali has a comparative advantage in thein the production of the goods in which each has amillion pounds of pistachios andImillion pounds

Opportunity cost is the cost of producing one good in terms of other. Opportunity cost shows the…

Glacier has a comparative advantage in the production of production of . Suppose that Glacier and Denali specialize comparative advantage. After specialization, the two countries can produce a total of of corn. , while Denali has a comparative advantage in the in the production of the goods in which each has a million pounds of pistachios and million pounds

Glacier has a comparative advantage in the production of production of . Suppose that Glacier and Denali specialize comparative advantage. After specialization, the two countries can produce a total of of corn. , while Denali has a comparative advantage in the in the production of the goods in which each has a million pounds of pistachios and million pounds

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Power of Trade and Comparative Advantage: End of Chapter Problem “Opportunity cost” is one of the tougher ideas in economics. Let’s make it easier by starting with some simple examples. In the following examples, find the opportunity cost: Your answer should be a rate, as in “1.5 widgets per year” or “6 lectures per month.” Assume that these relationships are simple linear ones, so that if you put in twice the time you get twice the output, and half the time yields half the output. a. Erin has a choice between two activities: She can repair one transmission per hour or she can repair two fuel injectors per hour. What is the opportunity cost of repairing one transmission? b. Katie works at a customer service center and every hour she has a choice between two activities: answering 200 telephone calls per hour or responding to 400 emails per hour. What is the opportunity cost of responding to 400 phone calls? c. Deirdre has a choice between writing one more book this year or five…
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