Comparative Advantage & Trade Practice Worksheet
A. Determine which country has an absolute advantage in producing each product. CIRCLE which country
has the absolute advantage for each product.
1.
* (Output Question)
Canada can produce 80 tank or 4 Battleships
Japan can produce 20 tanks or 2 Battleships
B. Calculate the opportunity cost for producing one of each product. In other words, calculate the per unit
opportunity cost.
Graph:
80
60
TANKS
20
с
1 2 3 4
Battleships
Canada
PPC-Tanks & Battleships
Trade Options:
Tanks
Japan
1.
What is the overall opportunity cost for Canada in producing tanks?__
Battleships?
2. What is the overall opportunity cost for Japan in producing tanks?
Battleships?
3.
What is the per unit opportunity cost? (what is the cost per unit?) Canada - 1 Tank =
Canada - 1 Battleship =
Japan-1 Tank_
Japan - 1 Battleship =
*Cost (what your producing) divided by Gain (what your gaining)
C. Who has the comparative advantage in producing each product? In other words, who uses less resources
to produce each good?
1. Who has a comparative advantage for producing tanks?
2. Who has a comparative advantage for producing battleships?
D. Identify a terms of trade that benefits both countries. (1 battleships for
computers)
In terms of trade: Why would you make the trade or why would you not make the trade?
Place an "X" mark in the blank that represents a reasonable trade.
1 battleship ship for 60 tanks
1 battleship ship for 50 tanks
Battleships
1 battleship ship for 40 tanks
1 battleship ship for 30 tanks
1 battleship ship for 20 tanks
1 battleship ship for 15 tanks
1 battleship ship for 10 tanks
Trade
Trade
Trade
Trade
Trade
Trade
Trade