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Directions: For each constant cost problem below, answer the following questions
1. Does OUTPUT vary or does INPUT vary in this problem?
2. Who has the absolute advantage for each product?
3. Who has a comparative advantage for the first product?
4. Who has a comparative advantage for the second product?
5. Within what range will the terms of trade be?
after creating a cost ratio table:
REMEMBER:
(000)
Output problems Opportunity
cost goes Over
(IOU) Input problems Opportunity
cost goes Under
(a) Mexico is able to produce 15 tons of soybeans or 60 tons of avocados. The US is able to produce 30 tons of
soybeans or 90 tons of avocados.
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Cc) Robinson Crusoe can gather 10 coconuts or catch 1 fish per hour. His friend, Friday, can gather 30 coconuts or
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(d] In Texas, a Farmer requires 40 hours of labor to produce one unit of beef or 20 hours oflabor to produce one
unit of potatoes. His neighbor, a Rancher, requires 30 hours oflabor to produce one unit of beef or 10 hours of
labor to produce one unit of potatoes.
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WORKSHEET
... DUE NEXT CLASS
1. Joy gives 2 haircuts or one perm in an hour. Susie gives 3 haircuts or 2 perms in an hour.
2. George fixes 16 flats or 8 brakes per day. Amy fixes 14 flats or 8 brakes per day.
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3. Ana takes 30 minutes to wash the dishes and one hour to vacuum the house. Her husband, Joe, takes 15 minutes
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4. Texans require 10 labor hours per unit of beef produced and 30 labor hours per unit of cotton produced.
Virginians require 15 labor hours per unit of beef and 40 hours per unit of cotton.
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5. Spaniards can produce 10 gallons of wine or 8 gallons of olive oil per worker hour. Americans can produce 9
gallons of wine or 3 gallons of olive oil per worker hour.
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COMPARATIVE ADVANTAGE WORKSHEET
6. It takes Canadians 6 hours to produce one unit of calculators and 4 hours to produce one unit of backpacks.
takes Japanese 2 hours to produce the calculators and 3 hours to produce the backpacks.
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7. Americans produce 50 computers
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8. Refinery EM can produce 22 gallons of gasoline or 18 gallons of flight fuel per barrel of crude oil. Refinery CG can
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9. Victor can mow a yard in 2 hours for $30 or he can work at the mall for 3 hours for $30. Elizabeth can mow a
yard in 3 hours for $30 or she can work at the mall for 4 hours for $30.
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