OPPORTUNITY COST, SPECIALIZATION AND EXCHANGE.. Two countries namely A and B produce car and rice, both countries have 720 labors.. Below table shows the required labors to produce one u
Trang 2• PRODUCTION POSSIBILITY FRONTIER (PPF)
• OPPORTUNITY COST
• ABSOLUTE ADVANTAGE
• COMPARATIVE ADVANTAGE
• SPECIALIZATION
• EXCHANGE
Trang 3Every day you rely on many people from around the world, most of whom you’ve never met,
to provide you with the goods and services you enjoy. coffee from Kenya
dress shirt from
Vietnam
cell phone from Taiwan hair gel from China
Trang 5OPPORTUNITY COST, SPECIALIZATION AND EXCHANGE. Two countries (namely A and B) produce car and rice, both countries have 720 labors Below table shows the required labors to produce one unit of rice or car
a Draw the production possibility frontiers Show your choice
of production as each country equally allocates the resources
b What is the opportunity cost to produce each item?
c Find the absolute advantage and comparative advantage of
each country (if any)
d If countries specialize and exchange? Show the result on the
diagrams
Trang 6OPPORTUNITY COST, SPECIALIZATION AND EXCHANGE.
Cost Total Opportunity
cost
Balance resources Specialization Exchange
Car Rice Car Rice Car Rice Car Rice Car Rice Car Rice
Car Rice Exchange Price Absolute Advantage
Comparative Advantage
Trang 7220
200
180
160
140
120
100
80
60
40
20
Trang 8720 Cost Total Opp cost Allocation Specialization Exchange
Car Rice Car Rice Car Rice Car Rice Car Rice Car Rice
A 18 6 40 120 3.0 1/3 20 60 40.0 0.0 21 76
B 20 4 36 180 5.0 1/5 18 90 0.0 180 19 104
21; 76
19; 104
0
20
40
60
80
100
120
140
160
180
200
-1 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45
Absolute advantage
Comparative Advanatge
Exchange 19 Car 76 rice
Trang 9OPPORTUNITY COST, SPECIALIZATION AND EXCHANGE.
Cost Total Opportunity
cost
Balance resources Specialization Exchange
Car Rice Car Rice Car Rice Car Rice Car Rice Car Rice
Car Rice Exchange Price Absolute Advantage
Comparative Advantage
Trang 10220
200
180
160
140
120
100
80
60
40
20
Trang 11720 Cost Total Opp cost Allocation Specialization Exchange
Car Rice Car Rice Car Rice Car Rice Car Rice Car Rice
19; 85
21; 131
0
20
40
60
80
100
120
140
160
180
200
220
240
260
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42
Absolute advantage
Comparative Advanatge
Exchange 17 Car 85 rice