1. Comparative Advantage and Trade Why do economies trade?

2. Graph the Following PPC Packs of GumChocolate Bars 012 58 104 150

3. Answer the Following: 1.What is the slope of the curve? 2.What is the opportunity cost of producing a pack of gum? 3.What is the opportunity cost of producing a chocolate bar? 4.Calculate the area under the curve.

4. Packs of Gum Chocolate Bars 0 1212 1515 Production Possibilities Curve PPC

5. Answer the Following: 1.What is the slope of the curve? 2.What is the opportunity cost of producing a pack of gum? 3.What is the opportunity cost of producing a chocolate bar? 4.Calculate the area under the curve. -4/5 -4/5 of a chocolate bar -1.25 packs of gum 90 units

6. Plot the following PPC on the same graph Packs of GumChocolate Bars 010 25 40

7. Packs of Gum Chocolate Bars 0 1212 1515 Production Possibilities Curve PPC A 1010 4 PPC B

8. Who has absolute advantage? CountryGumChocolate A1512 B410 Which country can make more? Country A has absolute advantage in both gum and chocolate

9. Who has comparative advantage? CountryGumChocolate A-4/5 chocolate-5/4 gum B- 5/2 chocolate-2/5 gum How do the opportunity costs compare for both countries? Country A has comparative advantage in gum Country B has comparative advantage in chocolate

10. Work Together… StateApplesTimber Oregon1040 Washington4010 1.Draw the PPCs for both states 2.Who has absolute advantage? 3.Who has comparative advantage? 4.What happens to production and consumption when Oregon and Washington trade 20 apples for 20 timber? Values represent all resources spent on one good (the other value is 0)