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Comparative Advantage and Trade

Comparative Advantage and Trade. Why do economies trade?. Graph the Following PPC. Answer the Following:. What is the slope of the curve? What is the opportunity cost of producing a pack of gum? What is the opportunity cost of producing a chocolate bar? Calculate the area under the curve.

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Comparative Advantage and Trade

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  1. Comparative Advantage and Trade Why do economies trade?

  2. Graph the Following PPC

  3. Answer the Following: • What is the slope of the curve? • What is the opportunity cost of producing a pack of gum? • What is the opportunity cost of producing a chocolate bar? • Calculate the area under the curve.

  4. Production Possibilities Curve Chocolate Bars 12 PPC 0 15 Packs of Gum

  5. Answer the Following: • What is the slope of the curve? • What is the opportunity cost of producing a pack of gum? • What is the opportunity cost of producing a chocolate bar? • Calculate the area under the curve. -4/5 -4/5 of a chocolate bar -1.25 packs of gum 90 units

  6. Plot the following PPC on the same graph

  7. Production Possibilities Curve Chocolate Bars 12 10 PPCA PPCB 0 4 15 Packs of Gum

  8. Who has absolute advantage? Which country can make more? Country A has absolute advantage in both gum and chocolate

  9. Who has comparative advantage? How do the opportunity costs compare for both countries? Country A has comparative advantage in gum Country B has comparative advantage in chocolate

  10. Work Together… Values represent all resources spent on one good (the other value is 0) • Draw the PPCs for both states • Who has absolute advantage? • Who has comparative advantage? • What happens to production and consumption when Oregon and Washington trade 20 apples for 20 timber?

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