Comparative Advantage and Trade

1. Comparative Advantage: Refer to your answers to Question 5 on your Chapter 3 Pre-lecture Assignment to answer
the following questions. If you are not confident your answer to Question 5 on your Chapter 3 Pre-lecture, be sure
to double check them (perhaps with me or on the discussion board.) It is likely that they were not graded for
correctness on the pre-lecture.
a. Who has the absolute advantage in producing cars? How do you know this? Explain using the numbers from the
statement of the problem.
b. Plug in your MOCs from the Chapter 3 pre-lecture assignment into the following table. Be sure to add labels. For
example, if you are calculating the MOC for one boat, the label will be in terms of cars and vice versa. Your
answers to the next questions need to be justified with the numbers in the table, so be sure to enter your
answers with care.
c. Who has the comparative advantage in producing boats? How you know this? Support your answer with
numbers from your table above.
d. Who should specialize in producing boats? Why?
e. Who should specialize in producing cars? Why? Support your answer with numbers from your table above.

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