Answered: ou only need to explain with words how…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Context: In the absence of trade, assume Andy and Jack divide their time equally between the two activities. Then, Andy and Jack decide to trade with each other and specialize in the product in which they have a comparative advantage.

You only need to explain with words how trade makes each person better off. Include graphs/tables/calculations in the explanation. Present answers with 4 decimals if needed. Note that Shoes & Gloves is in the x-axis, and Andy & Jack is in the y-axis.

Production/hr	Shoes	Gloves
Andy	96	62
Jack	74	38

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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