Economics: Comperative Advantage

posted by .

Refer to Figure 4. Assume that Cliff and Paul were both producing wheat and corn, and each were dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. As a result, total production of corn would
a. increase by 1 bushel.
b. increase by 3 bushels.
c. increase by 5 bushels.
d. decrease by 2 bushels.

P.S. - Figure 4 represents the production of wheat and corn of two individuals in a graph. Paul can either produce 8 wheat (0,8) or 10 corn (10,0). Cliff can either produce 6 (0,6) wheat or 4 corn (4,0).

The answer to the question is "b", but I don't understand how to get this answer. Please help me understand.

  • Economics: Comperative Advantage -

    If Paul spends all of his time on W he produces 8 bushels, if all his time on C he produces 10. Since, as given, he spends equal amounts of time, he must be producing 4 W and 5 C. For a total of 9 bushels.
    Repeat for Cliff. He must initiall be producing 3 W and 2 C, for a total of 5 bushels. Between the two, they must be producing 7 W and 7 C.

    Now specialize. Paul now produces only C and produces 10 bushels. Cliff only produces W and produces 6, for a total of 16 bushels

    Corn went from 7 to 10, an increase of 3 bushels (so b is the correct answer)

    (BTW, Wheat went from 7 to 6, a decrease of 1)

  • eqirlt pmurib -

    qwptok cdrb ajtzeok sdebx ptfwgm lghcesibr vekfyli

Respond to this Question

First Name
School Subject
Your Answer

Similar Questions

  1. Mircoeconomics

    Figure 3-1 ____ 2. Refer to Figure 3-1. Assume that Cliff and Paul were both producing wheat and corn, and each were dividing their time equally between the two. Then they decide to specialize in the product they have a comparative …
  2. Economics

    (Absolute and Comparative Advantage) You have been given the following information concerning the production of wheat and cloth in the United States and United Kingdom: Labor Hours Required to Produce One Unit United Kingdom United …
  3. microeconomics

    Suppose that two people, Mary and John each live alone in an isolated region. They each have the same resources available, and they grow corn and raise pigs. If Mary devotes all her resources to growing corn, she can raise 200 pounds …
  4. economics

    Assume Cliff and Paul were both producing wheat and corn, and each person was dividing his time equally between the two. Then each decides to specialize in the product in which he has a comparative advantage. Furthermore, they agree …
  5. economics

    Suppose that there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels of corn. For Nebraska the opportunity …
  6. college economics

    Assume Nebraska and Virginia each have 100 acres of farmland. The following table gives hypothetical figures for yield per acre in the two states: Nebraska Virginia Wheat 15 5 Cotton 7 4 Who has the comparative advantage in the production …
  7. economics

    Suppose the USA and Canada are considering to trade. Assume there are only two goods in the economy: wheat and corn. The table below illustrates what each country can produce in a given year. Wheat Corn USA 4 2 Canada 5 8 In this case, …
  8. Economics

    The productivity of a single resource in producing wheat and microchips in both Canada and Japan: One unit of resource produces: Canada 50 tons wheat, 20 micrchips and Japan 2 tons wheat, 12 microchips. (b) Suppose Canada is endowed …
  9. economics

    Suppose the USA and Canada are considering to trade. Assume there are only two goods in the economy: wheat and corn. The table below illustrates what each country can produce in a given year. Wheat Corn USA 4 2 Canada 5 8 In this case, …
  10. economics

    Canada and the US both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if

More Similar Questions