How do you calculate comparative advantage of AP macro?
How do you calculate comparative advantage of AP macro?
To determine comparative advantage you have to calculate per unit opportunity cost using the formula give up/gain (the amount of good you are giving up divided by the amount of good you are gaining). Once you have calculated per unit opportunity cost, the country with the lowest one has a comparative advantage.
How do you calculate comparative advantage?
To calculate comparative advantage, find the opportunity cost of producing one barrel of oil in both countries. The country with the lowest opportunity cost has the comparative advantage.
What is comparative advantage AP Econ?
Comparative advantage refers to the person or country who can produce a good or service for the lowest opportunity cost.
How do you solve comparative advantage Problems?
Comparative advantage is when a country can produce a good with the least opportunity cost. In this example, the opportunity for iron ore is 1.25 cars in China and 0.71 cars in Australia. As Australia has the lowest opportunity cost for iron ore, it, therefore, has a comparative advantage in the production of iron ore.
When determining comparative advantage one must determine?
The theory of comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production. Comparative advantage suggests that countries will engage in trade with one another, exporting the goods that they have a relative advantage in.
What is an example of a comparative advantage?
Comparative advantage is what you do best while also giving up the least. For example, if you’re a great plumber and a great babysitter, your comparative advantage is plumbing. That’s because you’ll make more money as a plumber.
How do you calculate opportunity cost in macroeconomics?
The formula for calculating an opportunity cost is simply the difference between the expected returns of each option. Say that you have option A—to invest in the stock market hoping to generate capital gain returns.
What is comparative advantage example?
Which calculation helps determine which producer has the absolute advantage?
Which calculation helps determine which producer has the absolute advantage? Amount produced minus resources used.