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Absolute and Comparative Advantage

Absolute and Comparative Advantage. Absolute Advantage—the ability to produce more of a given product using a given amount of resource (you are BETTER than anybody!)

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Absolute and Comparative Advantage

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  1. Absolute and Comparative Advantage

  2. Absolute Advantage—the ability to produce more of a given product using a given amount of resource (you are BETTER than anybody!) • Comparative Advantage-The ability to produce a product most efficiently given all the other products that could be produced (not better than anybody—but it is what YOU can do BEST!)

  3. What is Mike’s opportunity cost of vacuuming in terms of washing dishes? What is Mike’s opportunity cost of washing dishes in terms of vacuuming? What is Debbie’s opportunity cost of vacuuming in terms of washing dishes? What is Debbie’s opportunity cost of washing dishes in terms of vacuuming?

  4. Mike gives up 2 loads of dishes to vacuum. 60/30 • Mike gives up ½ a vacuumed room to wash dishes. 30/60 • Debbie gives up 1 load of dishes to vacuum. 45/45 • Debbie gives up 1 vacuumed room to wash dishes. 45/45

  5. Who has absolute advantage in vacuuming? Debbie • Who has absolute advantage in washing dishes? Mike • Who has comparative advantage in vacuuming? Debbie • Who has comparative advantage in washing dishes? Mike

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