Comparative Advantage Practice

If you want to skip the lesson and just practice go to 10:48. I spend the first have of the video explaining how to identify which country has an absolute advantage, calculate opportunity cost, identify which country has a comparative advantage, and find a terms of trade that both countries would voluntarily agree to. The second half of the video is an additional practice questions where I quickly go over the answers. I also added the answers below if you are in a hurry. Thank you for watching, please subscribe. Additional Multiple Choice Questions https://www.youtube.com/watch?v=WLfOZz-_JMY&t=6s Unit 1 Summary Video (includes quick and dirty trick) https://www.youtube.com/watch?v=JBHbwtzHfDg ANSWERS Situation #1 (5:30) The US can produce 20 planes or 2 cruise ships France can produce 12 planes or 2 cruise ships -The US has an ABSOLUTE ADVANTAGE in planes -Neither has an ABSOLUTE ADVANTAGE in cruise ships -For the US, 1 plane costs 1/10 cruise ship and 1 ship costs 10 planes -For France, 1 plane costs 1/6 cruise ship and 1 ship costs 6 planes -US has COMPARATIVE ADVANTAGE in planes -France has COMPARATIVE ADVANTAGE in cruise ships -Terms of trade: 1 Cruise Ship for 7 Planes Situation #2 (11:12) Korea can produce 3 cars or 9 motorcycles Germany can produce 4 cars or 8 motorcycles -Germany has an ABSOLUTE ADVANTAGE in cars -Korea has an ABSOLUTE ADVANTAGE in motorcycles -For Korea, 1 car costs 3 motorcycles and 1 motorcycle costs 1/3 car -For Germany, 1 car costs 2 motorcycles and 1 motorcycle costs 1/2 car -Germany has COMPARATIVE ADVANTAGE in cars -Korea has COMPARATIVE ADVANTAGE in motorcycles -Terms of trade: 1 Car for 2.5 Motorcycles Situation #3 (13:22) Japan can produce 4 laptops or 12 phones Brazil can produce 1 laptops or 5 phones -Japan has an ABSOLUTE ADVANTAGE in laptops -Japan has an ABSOLUTE ADVANTAGE in phones -For Japan, 1 laptop costs 3 phones and 1 phone costs 1/3 laptop -For Brazil, 1 laptop costs 5 phones and 1 phone costs 1/5 laptop -Japan has COMPARATIVE ADVANTAGE in laptops -Brazil has COMPARATIVE ADVANTAGE in phones -Terms of trade: 1 Laptop for 4 Phones Situation #4 (16:08) Cuba takes 4hrs to make a TV and 12hrs to make salsa Mexico takes 1hr to make a TV and 5hrs to make salsa -Mexico has an ABSOLUTE ADVANTAGE in TVs -Mexico has an ABSOLUTE ADVANTAGE in Salsa -For Cuba, 1 TV costs 1/3 salsa and 1 salsa costs 3 TVs -For Mexico, 1 TV costs 1/5 salsa and 1 salsa costs 5 TVs -Mexico has COMPARATIVE ADVANTAGE in TVs -Cuba has COMPARATIVE ADVANTAGE in salsa -Terms of trade: 1 salsa for 2.5 TVs Get the Ultimate Review Packet http://www.acdcecon.com/#!review-packet/czji Macroeconomics Videos https://www.youtube.com/watch?v=XnFv3d8qllI Microeconomics Videos https://www.youtube.com/watch?v=swnoF533C_c Follow me on Twitter https://twitter.com/acdcleadership