Ecns 201

Trade & Cost Worksheet 1

Key Ideas: Absolute Advantage

Comparative Advantage

Marginal Cost of Production

Specialization in Production

Suppose you supervise two office employees, Chris and Pat, who can either do typing or filing. The following table gives their productive capabilities in a typical 8-hour day.

Typing

/

Filing

Chris

/ 20 pages OR 100 files
Pat / 40 pages OR 120 files

Who is the best typist? Who is the best filer? What are the criteria for “best”?

Suppose you MUST have 120 files filed in a given day. If you want to maximize the number of pages that are typed, (a) who will you have do the filing and typing…and how much will each person do? (b) what is the maximum number of pages that can be typed?

Calculate the “Marginal” cost of production for each employee.

MARGINAL COSTS OF TYPING AND FILING

Typing

/

Filing

Chris

Pat

SPECIALIZED PRODUCTION

Typing

/

Filing

Chris

Pat
Totals / 120