Answers to Review Questions 1
An individual has a comparative advantage
in the production of a particular good if she
can produce it at a lower opportunity cost
than other individuals,An individual has an
absolute advantage in the production of a
good if she can produce more of that good
than another individual,using comparable
amounts of time,raw materials and effort.
Answers to Review Questions
2,A reduction in the number of hours
worked each day will shift all points on the
production possibilities curve inward,
toward the origin,
3,Technological innovations that boost
labor productivity will shift all points on the
production possibilities curve outward,away
from the origin,
Answers to Review Questions
4,Failure to specialize means failure to exploit the
wealth-creating possibilities of the principle of
comparative advantage,Wealthy people buy most
of their goods and services from others not because
they can afford to do so,but because the high
opportunity cost of their time makes performing
their own services too expensive.
Answers to Review Questions
5,The fact that English has become the de facto
international language has done much to stimulate
international demand for American-made books,
movies and popular music,The large size of the
American market has given the United States an
additional advantage over other English-speaking
countries,like England,Canada,and Australia.
Answers to Problems
2,In time it takes Ted to wash a car he can
wax three cars,So his opportunity cost of
washing one car is three wax jobs,In the
time it takes Tom to wash a car,he can wax
two cars,So his opportunity cost of
washing one car is two wax jobs,Because
Tom’s opportunity cost of washing a car is
lower than Ted’s,Tom has a comparative
advantage in washing cars,
Answers to Problems
3,True,since Kyle and Toby face the same
opportunity cost of producing a gallon of
cider,they cannot gain from specialization
and trade.
Answers to Problems 4
4,In time it takes Nancy to replace a set of
brakes she can complete one-half of a
clutch replacement,So her opportunity
cost of replacing a set of brakes is one-half
of a clutch replacement,In the time it
takes Bill to replace a set of brakes,he can
he can complete one-third of a clutch
replacement,So his opportunity cost of
replacing a set of brakes is one-third of a
clutch replacement.
Answers to Problems 4
Because Bill’s opportunity cost of replacing a set of
brakes is lower than Nancy’s,Bill has a
comparative advantage in replacing brakes,That
means that Nancy has a comparative advantage in
replacing clutches,Nancy also has an absolute
advantage over Bill in replacing clutches,since it
takes her two hours less than it takes Bill to perform
that job,Since each takes the same amount of time
to replace a set of brakes,neither person has an
absolute advantage in that task.
Answers to Problems 9
a,Their maximum possible coffee
output is 36 pounds per day (12 from
Tom,24 from Susan).
b,Their maximum possible output of
nuts is also 36 pounds per day (12
from Susan,24 from Tom).
Answers to Problems 9
c,Tom should be sent to pick nuts,since
his opportunity cost (half a pound of coffee
per pound of nuts) is lower than Susan’s (2
pounds of coffee per pound of nuts),Since
it would take Tom only one hour to pick
four pounds of nuts,he can still pick 10
pounds of coffee in his 5 working hours
that remain,Added to Susan’s 24 pounds,
they will have a total of 34 pounds of
coffee per day.
Answers to Problems 9
d,Susan should be sent to pick coffee,
since her opportunity cost (half a pound of
nuts per pound of coffee) is lower than
Tom’s (2 pounds of nuts per pound of
coffee),It will take Susan 2 hours to pick 8
pounds of coffee,which means that she can
still pick 8 pounds of nuts,So they will
have a total of 32 pounds per day of nuts.
Answers to Problems 9
e,To pick 26 pounds of nuts per day,
Tom should work full time picking nuts (24
pounds per day) and Susan should spend
one hour per day picking nuts (2 pounds
per day),Susan would still have 5 hours
available to devote to coffee picking,so
she can pick 20 pounds of coffee per day.
An individual has a comparative advantage
in the production of a particular good if she
can produce it at a lower opportunity cost
than other individuals,An individual has an
absolute advantage in the production of a
good if she can produce more of that good
than another individual,using comparable
amounts of time,raw materials and effort.
Answers to Review Questions
2,A reduction in the number of hours
worked each day will shift all points on the
production possibilities curve inward,
toward the origin,
3,Technological innovations that boost
labor productivity will shift all points on the
production possibilities curve outward,away
from the origin,
Answers to Review Questions
4,Failure to specialize means failure to exploit the
wealth-creating possibilities of the principle of
comparative advantage,Wealthy people buy most
of their goods and services from others not because
they can afford to do so,but because the high
opportunity cost of their time makes performing
their own services too expensive.
Answers to Review Questions
5,The fact that English has become the de facto
international language has done much to stimulate
international demand for American-made books,
movies and popular music,The large size of the
American market has given the United States an
additional advantage over other English-speaking
countries,like England,Canada,and Australia.
Answers to Problems
2,In time it takes Ted to wash a car he can
wax three cars,So his opportunity cost of
washing one car is three wax jobs,In the
time it takes Tom to wash a car,he can wax
two cars,So his opportunity cost of
washing one car is two wax jobs,Because
Tom’s opportunity cost of washing a car is
lower than Ted’s,Tom has a comparative
advantage in washing cars,
Answers to Problems
3,True,since Kyle and Toby face the same
opportunity cost of producing a gallon of
cider,they cannot gain from specialization
and trade.
Answers to Problems 4
4,In time it takes Nancy to replace a set of
brakes she can complete one-half of a
clutch replacement,So her opportunity
cost of replacing a set of brakes is one-half
of a clutch replacement,In the time it
takes Bill to replace a set of brakes,he can
he can complete one-third of a clutch
replacement,So his opportunity cost of
replacing a set of brakes is one-third of a
clutch replacement.
Answers to Problems 4
Because Bill’s opportunity cost of replacing a set of
brakes is lower than Nancy’s,Bill has a
comparative advantage in replacing brakes,That
means that Nancy has a comparative advantage in
replacing clutches,Nancy also has an absolute
advantage over Bill in replacing clutches,since it
takes her two hours less than it takes Bill to perform
that job,Since each takes the same amount of time
to replace a set of brakes,neither person has an
absolute advantage in that task.
Answers to Problems 9
a,Their maximum possible coffee
output is 36 pounds per day (12 from
Tom,24 from Susan).
b,Their maximum possible output of
nuts is also 36 pounds per day (12
from Susan,24 from Tom).
Answers to Problems 9
c,Tom should be sent to pick nuts,since
his opportunity cost (half a pound of coffee
per pound of nuts) is lower than Susan’s (2
pounds of coffee per pound of nuts),Since
it would take Tom only one hour to pick
four pounds of nuts,he can still pick 10
pounds of coffee in his 5 working hours
that remain,Added to Susan’s 24 pounds,
they will have a total of 34 pounds of
coffee per day.
Answers to Problems 9
d,Susan should be sent to pick coffee,
since her opportunity cost (half a pound of
nuts per pound of coffee) is lower than
Tom’s (2 pounds of nuts per pound of
coffee),It will take Susan 2 hours to pick 8
pounds of coffee,which means that she can
still pick 8 pounds of nuts,So they will
have a total of 32 pounds per day of nuts.
Answers to Problems 9
e,To pick 26 pounds of nuts per day,
Tom should work full time picking nuts (24
pounds per day) and Susan should spend
one hour per day picking nuts (2 pounds
per day),Susan would still have 5 hours
available to devote to coffee picking,so
she can pick 20 pounds of coffee per day.
