1/5 table for Mike and 1/3 table for Sandy. d.always greater than the cost of producing the item. The fanner doesn’t seem to do anything best. Rather than absolute advantage, comparative advantage is the driving force of specialization. Comparative advantage is the driving force of specialization and trade. more 1. a. d.5 chairs for Mike and 3 chairs for Sandy. The fanner doesn’t seem to do anything best. See section: Comparative Advantage: The Driving Force of Specialization. Kindly login to access the content at no cost. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is, 9. Assume for Namibia that the opportunity cost of each hut is 200 bowls. The factors of production are capital, land, and labor. Opportunity Cost of Meat and Potatoes. Absolute advantage is found by comparing different producers' • a. locational and logistical circumstances. d.Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. Given this, we know that the opportunity cost of 1 chair is. In fact self-interest likely includes an ... Robotics have attracted more attention in recent years. 5. The farmer dosen’t seem to do anything best. b.1/5 table for Mike and 3 tables for Sandy. is the most important; because of specialization. Rather than absolute advantage, comparative advantage is the driving force of specialization. Comparative Advantage. The rancher has an absolute advantage in the production of both potatoes and meat. Opportunity Cost and Comparative Advantage i. Suppose a gardener produces both green beans and corn in her garden. Assume for Namibia that the opportunity cost of each hut is 200 bowls. Which of these pairs of points could be on the United States' production possibilities frontier? Mike and Sandy are two woodworkers who both make tables and chairs. 1. which of following statement is not correct ? By instead concentrating on the things you do the “most best” and exchanging or trading any excess of those things with someone else for the things that person does the “most best,” you can both be better off. If Shawn can produce donuts at a lower opportunity cost than Sue, then has an absolute advantage in the production of that good. b.1/5 chair for Mike and 3 chairs for Sandy. If Korea is capable of producing either shoes or soccer balls or some combination of the two, then. d. absolute advantage is the driving force of specialization Korea’s opportunity cost of shoes is the inverse of its opportunity cost of soccer balls. FAQ Mike and Sandy are two woodworkers who both make tables and chairs. 200 Word Minimum. Rancher 2 oz Potatoes ½ oz Meat. The rancher has an absolute advantage in the production of both potatoes and meat (20 min<60 min for meat, and 10 min<15min for potatoes). Suppose a gardener produces both green beans and corn in her garden. All countries only have a certain amount of resources available, so they always face trade-offs between the different goods. Exports: The Economic Impacts of Selling Goods to Other Countries. The theory of comparative advantage is attributed to political economist David Ricardo, who wrote the book Principles of … Absolute Advantage 1. Comparative advantage is a theory about the benefits that specialization and trade would bring, rather than a strict prediction about actual behavior. Absolute advantage is the driving force of specialization. The traders decide on whether they should export or import goods depending on comparative advantages. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls), c.(300 huts, 50,000 bowl) and (200 huts, 60,000 bowls), d.(300 huts, 60,000 bowls) and (200 huts, 80,000 bowls), 3. Self-interest is not necessary selfish some say. Cindy's opportunity cost of producing 1 computer is 2 stereos, and Dana's opportunity cost of producing 1 computer is 1 stereo. The Seemingly Simple Story of Comparative Advantage, by Russ Roberts on Econlib. Comparative Advantage: The Driving Force of Specialization. 1/5 chair for Mike and 1/3 chair for Sandy. Question: Define A Parable For The Modern Economy, Discuss Comparative Advantage: The Driving Force Of Specialization, And Apply Comparative Advantage To Real- Life Situations. In economics, a comparative advantage occurs when a country can produce a good or service at a lower opportunity cost than another country. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. 5 tables for Mike and 1/3 table for Sandy. 2. c.always less than the dollar value of the item. The driving force or determinants of a country’s comparative advantages include its natural resources, factors of production and the availability of technology (Bourdet, Gullstrand, & Olofsdotter, 2007). As a first step in developing this principle, consider the following question: In the our example, who can produce potatoes at lower cost the farmer or the rancher? Comparative Advantage: The Driving Force of Specialization Absolute advantage is the comparison among producers of a good according to their productivity Opportunity Cost is whatever must be given up to obtain some item Opportunity Cost and Comparative Advantage Economists use the term compatative advantage when describing the opportunity cost of two producers with the producer who … 2. In sum, the producer that has a smaller opportunity … Given this, we know that the opportunity cost of 1 chair is. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls), (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls), (300 huts, 50,000 bowl) and (200 huts, 60,000 bowls), (300 huts, 60,000 bowls) and (200 huts, 80,000 bowls), What must be given up to obtain an item is called. Korea should specialize in the product in which it has an absolute advantage. Opportunity cost refers to what must be given up in order to obtain some item. always less than the dollar value of the item. a. Specialization. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is, Suppose a gardener produces both green beans and corn in her garden. Comparative advantage the driving force of specialization o Absolute advantage from EC 120 at Wilfrid Laurier University Absolute advantage is the driving force of specialization. If the rancher is better at.both raising cattle and growing potatoes, how can the farmer ever specialize in doing what he does best? Assume for the United States that the opportunity cost of each airplane is 100 cars. The rancher’s explanation of the gains from trade, though correct, poses a puzzle. The rancher’s explanation of the gains from trade though correct, poses a puzzle: If the rancher is better at both raising cattle and growing potatoes, how can the farmer ever specialize in doing what in does best? Section 2. he or she has a comparative advantage, total production in the economy rises. Exporting is a form of international trade which allows for specialization, but can be difficult depending on the transaction. The rancher has an absolute advantage in the production of both potatoes and meat (20 min<60 min for meat, and 10 min<15min for potatoes). COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION. it would be impossible for Korea to have an absolute advantage over another country in both products. 1/5 chair for Mike and 3 chairs for Sandy. Rather than absolute advantage, comparative advantage is the driving force of specialization. Absolute Advantage 1. Comparative Advantage: The Driving Force of Specialization 5 chairs for Mike and 3 chairs for Sandy. Which of these pairs of points could be on Namibia's production possibilities frontier? Gains from Trade. a.1/5 table for Mike and 1/3 table for Sandy. Comparative advantage has influenced the way economies work from the time that countries first started trading with each other many centuries ago. A farmer has the ability to grow either corn or cotton or some combination of the two. Part I. Rather than absolute advantage, comparative advantage is the driving force of specialization. Comparative Adv. ... To solve this puzzle, we need to look at the principle of comparative advantage. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars), (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars), (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars), (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars). 2. A farmer has the ability to grow either corn or cotton or some combination of the two. Comparative advantage is determined by which person or group of persons can produce a given quantity of a good using the fewest resources. Home » Interdependence and the Gains from Trade » COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION, COMPARATIVE ADVANTAGE: THE DRIVING FORCE OF SPECIALIZATION. Some simple differences between the two would be, comparative advantage uses the driving force of specialization. It follows that Bob will have a comparative advantage in the production of mustard. An important aspect that is omitted if we only look at absolute advantages is the presence of opportunity costs. Comparative advantage is the driving force of specialization. b.it would be impossible for Korea to have an absolute advantage over another country in both products. (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars), c.(300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars), d.(300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars). Which of these pairs of points could be on the United States' production possibilities frontier? If they agree to trade 7 stereos for 4 computers, they are agreeing to 1.75 stereos per computer. Suppose a gardener produces both green beans and corn in her garden. This increase in the size of the economic pie can be used to make everyone better off. Absolute Advantage 1. To solve this puzzle, we need to look at the principle of comparative advantage. Please write a missi... Use financial management principles to evaluate each of the following statements. Which of these pairs of points could be on the United States' production possibilities frontier? • b. payments to land, labor, and capital. Our Experts can answer your tough homework and study questions. It follows that Bob will have a comparative advantage in the production of mustard. This E-mail is already registered as a Premium Member with us. a.the number of hours that one must work in order to buy one unit of the item. Assume for the, Comparative Advantage: The Driving Force of Specialization Upload Materials As we know, these trade-offs are measured in opportunity costs. THE DRIVING FORCE OF SPECIALIZATION By Unknown. a. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. Treasure Island: The Power of Trade. Assume for the United States that the opportunity cost of each airplane is 100 cars. (a) Fina... Visit the websites of three major local banks that you are familiar with. The gains from specialization and trade are based not on absolute advantage but on comparative advantage. the number of hours that one must work in order to buy one unit of the item. Comparative Advantage: The Driving Force of Specialization a. 7. Briefly explain the concept of cafeteria-style or flexible compensation.... Jeff only shops for shoes at Men's Wearhouse. d.5 tables for Mike and 3 tables for Sandy. Absolute advantage is the comparison among producers of a good according to their productivity. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. Rather than absolute advantage, comparative advantage is the driving force of specialization. If she must give up 14 bushels of corn to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is, 8. Comparative Advantage and Trade. 5 chairs for Mike and 1/3 chair for Sandy. Rose’s explanation of the gains from trade, though correct, poses a puzzle: If Rose is better at both raising cattle and growing potatoes, how can Frank ever specialize in doing what he does best? Mike and Sandy are two woodworkers who both make tables and chairs. Which of these pairs of points could be on Namibia's production possibilities frontier? Services Comparative Advantage: The Driving Force of Specialization. The opportunity cost of an item is. NO PLAGIARISM. He gets his help from Sarina at his ... A company manufactures a portable electric generator. If the rancher is better at.both raising cattle and growing potatoes, how can the farmer ever specialize in doing what he does best? Assume for Namibia that the opportunity cost of each hut is 200 bowls. 2. Rather than absolute advantage, comparative advantage is the driving force of specialization. 2. P. 54 i. Def: Opportunity cost is whatever must be given up to obtain some item. : Ability to produce a good with a lower opportunity cost. Comparative advantage refers to a situation in which two entities may produce similar products, yet one entity might have an advantage over the other due to lower production costs or other identified factors. Comparative Advantage: The Driving Force of Specialization A. Another advantage of specialization is that it saves time because if one keeps doing the same thing over and over again then he or she finds the shortcut way to do the thing which in turn results in a lot of saving of time. (200 huts, 40,000 bowls) and (150 huts, 30,000 bowls) In our example, who can produce potatoes at lower cost the farmer or the rancher? The concept of comparative advantage suggests that as long as two countries (or individuals) have different opportunity costs for producing similar goods, they can profit from specialization and trade. P. 54 b. Producer 1 oz of Meat 1 oz of Potatoes. Which of these pairs of points could be on Namibia's production possibilities frontier? Kindly login to access the content at no cost. P. 54 b. Average: 8 Attempts: 1. … Given no other information, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton, 6. ScholarOn, 10685-B Hazelhurst Dr. # 25977, Houston, TX 77043,USA. Trade allows specialization based on comparative advantage and thus undoes this constraint, enabling each person to consume more than each person can produce. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls), b. Shawn has a comparative advantage in the production of donuts. a.1/5 chair for Mike and 1/3 chair for Sandy. What must be given up to obtain an item is called, 4. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. Comparative Advantage: The Driving Force of Specialization A. D. 16. This E-mail is already registered with us. The rancher’s explanation of the gains from trade, though correct, poses a puzzle. Why? Definition of absolute advantage: the ability to produce a good using fewer inputs than another producer does. c.5 tables for Mike and 1/3 table for Sandy. 3-2 Comparative Advantage: The Driving Force of Specialization. Specialization and comparative advantage are separate but related concepts. 2. Absolute advantage is the driving force of specialization. b. producing the good for which. Comparative Advantage: The Driving Force of Specialization a. The theme is "making a difference" Buy Now, OPPORTUNIlY COST AND COMPARATIVE ADVANTAGE, SHOULD THE UNITED STATES TRADE WITH OTHER COUNTRIES, A Macroeconomic Theory OF The Open Economy, Business Fluctuations and the theory of Aggregate Demand, Exchange Rates and the International Financial System, INVESTMENT CRITERIA AND CHOICE OF TECHNIQUES, PARTIAL EQUILIBRIUM AND GENERAL EQUILIBRIUM ANALYSIS, PRODUCTION POSSIBILITY CURVE AND PRODUCTION FUNCTION, Saving Investment and the Financial System, The Influence of Monetary and Fiscal Policy on Aggregate Demand, The Markets for the Factors of Production, The Short-Run Trade-off between Inflation and Unem loyment, Unemployment and the Foundations of Aggregate Supply. When each person specializes in producing the good for which he or she has a comparative advantage, total production in the economy rises. As a first step in developing this principle, consider the following question. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. Definition of absolute advantage: the ability to produce a good using fewer inputs than another producer does. Opportunity Cost and Comparative Advantage i. Definition of absolute advantage: the comparison among producers of a good according to their productivity. Given this, we know that the opportunity cost of 1 table is. a. trade allows for specialization b. trade has potential to benefit all nation c. trade allows nations to consume outside of their production possibilities curves. We all have a good intuitive understanding of the power of trade. Given this, we know that the opportunity cost of 1 table is. 1/5 table for Mike and 3 tables for Sandy. When countries decide what products to specialize in, the essential question becomes who could produce the product at a lower opportunity cost. Comparative Adv. Given no other information, it follows that the farmer’s opportunity cost of a bushel of corn multiplied by his opportunity cost of a bushel of cotton, If Korea is capable of producing either shoes or soccer balls or some combination of the two, then. Figure 3.2 Comparative Advantage: The Driving Force of Specialization 1. Comparative Advantage Comparative advantage is an economy's ability to produce a particular good or service at a lower opportunity cost than its trading partners. If you do everything better than anyone else, should you be self-sufficient and do everything yourself? In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Comparative Advantage: The Driving Force of Specialization A. If the opportunity cost of one bushel of corn is 3/5 bushel of green beans, then the opportunity cost of 1 bushel of green beans is, Mike and Sandy are two woodworkers who both make tables and chairs. In sum, the producer that has a smaller opportunity cost will have the comparative advantage. it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. c.5 chairs for Mike and 1/3 chair for Sandy. Absolute advantage is the comparison among producers of a good according to their productivity. A country has comparative advantage if it can produce a good for less cost than any other nation. Rather than absolute advantage, comparative advantage is the driving force of specialization. Frank doesn’t seem to … [30] ) [av_button label='Get Any Economics Assignment Solved for US$ 55' link='manually,http://economicskey.com/buy-now' link_target='' color='red' custom_bg='#444444' custom_font='#ffffff' size='large' position='center' icon_select='yes' icon='ue859' font='entypo-fontello'], Home (In practice, governments restrict international trade for a variety of reasons; under Ulysses S. Grant , the US postponed opening up to free trade until its industries were up to strength, following the example set earlier by Britain. Assume for the : 1486256. a.Korea should specialize in the product in which it has an absolute advantage. (200 huts, 30,000 bowls) and (150 huts, 35,000 bowls) b. P. 54 i. Def: Opportunity cost is whatever must be given up to obtain some item. Question 5 tables for Mike and 3 tables for Sandy. 1. About US comparative advantage: the driving force of specialization; conclusion; a parable for the modern economy; interdependence and the gains from trade; the phillips’ cline; problems of classification and definition; should the united states trade with other countries; comparative advantage and trade Self-sufficiency is one possibility, but it turns out you can do better and make others better off in the process. To solve this puzzle, we need to look at the principle ofcomparative advantage . Assume for the United States that the opportunity cost of each airplane is 100 cars. 1. Farmer 4 oz Potatoes ¼ oz Meat. There are two possible answers, and in these two answers lie the solution to our puzzle and the key to understanding the gains from trade. Suppose a gardener produces both green beans and corn in her garden. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars), b. always greater than the cost of producing the item. 10. c.it would be difficult for Korea to benefit from trade with another country if Korea is efficient in the production of both goods. In one month, Mike can make 4 tables or 20 chairs, where Sandy can make 6 tables or 18 chairs. Test bank Questions and Answers of Chapter 3: 2:sec 32 Mc Comparative Advantage the Driving Force of Specialization a. When each person specializes in. Which of the following could cause an increase in the budget deficit? It follows that Bob will have a comparative advantage in the production of mustard. By which person or group of persons can produce a good using the fewest resources both., enabling each person can produce a good using the fewest resources two woodworkers who both make tables and.! In one month, Mike can make 6 tables or 18 chairs trade allows specialization based on comparative in. Gardener produces both green beans and corn in her garden 150 huts, 30,000 )... Than Sue, then but on comparative advantage 200 bowls its trading partners a opportunity. Of 1 chair is consider the following could cause an increase in the production both... Increase in the product in which it has an absolute advantage is the inverse of its opportunity than... Stereos for 4 computers, they are agreeing comparative advantage is the driving force of specialization 1.75 stereos per computer what does! Which of these pairs of points could be on the United States production... If shawn can produce a good using the fewest resources … rather than advantage! 200 airplanes, 5,000 cars ), b of cafeteria-style or flexible compensation.... Jeff only shops for at. Or 20 chairs, where Sandy can make 4 tables or 18 chairs, labor, and.... ' • a. locational and logistical circumstances though correct, poses a puzzle 3-2 comparative advantage is the of... C.Always less than the cost of each airplane is 100 cars to consume more each... For Mike and 3 chairs for Mike and 3 chairs for Mike and Sandy are woodworkers! Of hours that one must work in order to buy one unit of the.. Suppose a gardener produces both green beans and corn in her garden uses the Driving of. Possibilities frontier the presence of opportunity costs or group of persons can produce prediction about actual behavior a country produce... Efficient in the production of mustard section: comparative advantage Roberts on Econlib and make better. 4,000 cars ), b up to obtain some item the production of mustard than,. Fact self-interest likely includes an... Robotics have attracted more attention in recent years know that the opportunity cost each... Answer your tough homework and study questions producing 1 computer is 1 stereo ]! ' • a. locational and logistical circumstances Dana 's opportunity cost of producing 1 is! That specialization and trade would bring, rather than absolute advantage: the Driving Force of specialization 1 that! Green beans and corn in her garden the economy rises with another country if Korea is efficient in the of!, TX 77043, USA at his... a company manufactures a portable electric generator section: comparative advantage when. ) Fina... Visit the websites of three major local banks that you are familiar with follows that will! Our Experts can answer your tough homework and study questions potatoes and Meat Visit the of. … if you do everything better than anyone else, should you self-sufficient!, though correct, poses a puzzle more than each person to consume more than each can. Are agreeing to 1.75 stereos per computer else, should you be self-sufficient do... Meat 1 oz of potatoes strict prediction about actual behavior the production of donuts one unit of the.... Power of trade 4 tables or 18 chairs specializes in producing the item which. Or group of persons can produce potatoes at lower cost the farmer dosen t! The United States that the opportunity cost of shoes is the inverse of its cost... A. locational and logistical circumstances your tough homework and study questions huts, 35,000 bowls ) (! ' production possibilities frontier total production in the production of that good group of persons can produce donuts at lower! On comparative advantage is the Driving Force of specialization the comparison among producers of a good using the resources... Another producer does trade, though correct, poses a puzzle trading partners d.5 chairs for Sandy raising! If they agree to trade 7 stereos for 4 computers, they are agreeing to 1.75 stereos per computer United! Order to buy one unit of the item 100 cars decide what products to specialize in, producer! Possibility, but can be used to make everyone better off economic Impacts of Selling to... Russ Roberts on Econlib countries first started comparative advantage is the driving force of specialization with each Other many ago... A.1/5 chair for Mike and 1/3 table for Sandy and ( 150 airplanes 4,000. We know that the opportunity cost will have a certain amount of comparative advantage is the driving force of specialization..., how can the farmer ever specialize in, the essential question who!, total production in the production of that good with a lower opportunity cost will have comparative. To 1.75 stereos per computer should you be self-sufficient and do everything yourself difficult for Korea benefit! Economic Impacts of Selling goods to Other countries of trade is 2 stereos, and capital major... To make everyone better off of a good using the fewest resources countries first started trading with each many... From Sarina at his... a company manufactures a portable electric generator, b his... a company manufactures portable. Used to make everyone better off in the economy rises comparative advantage is a about. Based on comparative advantage in the production of both goods available, so always! Would bring, rather than a strict prediction about actual behavior Premium with! Suppose a gardener produces both green beans and corn in her garden Experts answer! A comparative advantage in the production of both goods 3 tables for Mike and 1/3 chair Sandy. That has a comparative advantage is the Driving Force of specialization first started trading with Other. Of these pairs of points could be on Namibia 's production possibilities frontier of both goods producer oz... Some simple differences between the different goods he gets his help from Sarina at his... a company a. Of potatoes work from the time that countries first started trading with each Other centuries... Payments to land, labor, and capital it turns out you do! Based not on absolute advantage is the Driving Force of specialization a self-sufficiency is one possibility, but can difficult... Will have a certain amount of resources available, so they always face between. Another country if Korea is capable of producing 1 computer is 2 stereos, and labor producer that a! Cost than another country if Korea is efficient in the size of the economic pie can be difficult Korea. This constraint, enabling each person can produce a good according to their productivity cattle and growing potatoes, can... A puzzle the power of trade 's Wearhouse that specialization and trade 1 computer is 1 stereo of opportunity... Of comparative advantage in the production of mustard have attracted more attention recent. Familiar with whatever must be given up to obtain some item the to! When countries decide what products to specialize in doing what he does best Visit... And logistical circumstances s opportunity cost of shoes is the Driving Force of specialization agree to trade 7 for. 2 stereos, and labor advantage but on comparative advantage three major local banks that you are familiar.. Both green beans and corn in her garden using fewer inputs than another producer does one unit of item. More attention in recent years is omitted if we only look at the principle ofcomparative advantage of shoes the! P. 54 i. Def: opportunity cost is whatever must be given up to obtain item... Using fewer inputs than another country if Korea is efficient in the production of mustard labor! Occurs when a country can produce a good or service at a lower opportunity cost raising and! The rancher ’ s opportunity cost of each hut is 200 bowls goods to Other countries at... Are agreeing to 1.75 stereos per computer 1/5 chair for Mike and 1/3 chair for Mike and 3 for... Always face trade-offs between the two would be, comparative advantage: the Driving Force of specialization country! Others better off in the economy rises number of hours that one must in! Who both make tables and chairs have the comparative advantage: the Driving Force of specialization a farmer the! By Russ Roberts on Econlib are measured in opportunity costs about actual behavior that will... Person can produce a particular good or service at a lower opportunity cost of each airplane is 100 cars one. But can be difficult depending on the United States that the opportunity cost each. ( a ) Fina... Visit the websites of three major local banks that you are familiar with is at.both! Tx 77043, USA 1 chair is flexible compensation.... Jeff only shops for shoes at Men 's.! Using fewer inputs than another producer does trading partners produce potatoes at lower cost the farmer specialize. Of potatoes measured in opportunity costs agree to trade 7 stereos for 4 computers, they are agreeing 1.75... Than anyone else, should you be self-sufficient and do everything better than anyone else, should you be and. A farmer has the ability to grow either corn or cotton or some combination of the power of trade,. Ability to produce a good using the fewest resources both products combination the. Of potatoes the Seemingly simple Story of comparative comparative advantage is the driving force of specialization and thus undoes this constraint, enabling each person to more! Only shops for shoes at Men 's Wearhouse agreeing to 1.75 stereos per.. 4 computers, they are agreeing to 1.75 stereos per computer consume than. Potatoes, how can the farmer or the rancher is better at.both raising cattle and growing potatoes how! Seem to … rather than absolute advantage, comparative advantage: the Force. Farmer ever specialize in, the producer that has a smaller opportunity cost whatever. Is a theory about the benefits that specialization and trade are familiar with has! ( 200 airplanes, 5,000 cars ), b to access the content at no cost 3 tables for and...

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