Comparative Advantage Worksheet:

What is the difference between absolute advantage and comparative advantage?

Use the charts to complete the following questions:

MIKE & DEBBY

Mike / Debby
Vacuum room / 60 minutes / 45 minutes
Wash Dishes / 30 minutes / 45 minutes

Mike: DEBBY:

1 room = 1load 1 room = 1 load

1 load = 1/2 room 1 load = 1 room

  1. What is Mike’s opportunity cost of vacuuming in terms of washing dishes

2 loads of dishes

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

Vacuuming ½ a room

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

Washing 1 load of dishes

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

Vacuuming 1 room

  1. Who has the absolute advantage in vacuuming?

Debbie

  1. Who has the absolute advantage in washing dishes?

Mike

  1. Who has the comparative advantage in vacuuming?

Debbie

  1. Who has the comparative advantage in washing dishes?

Mike

  1. Who should do which chore and why?

Mike should wash dishes and Debbie should vacuum because they have the comparative advantage in those chores. They have the lowest opportunity cost in the chores and will be more efficient.

ANDY & HANNAH

Andy / Hannah
cleaning offices / 60 minutes / 20 minutes
cleaning jail cells / 30 minutes / 15 minutes

ANDY: HANNAH:

1 office = 2 jail cells 1 office = 4/3 jail cells

1 jail cell = ½ office 1 jail cell = ¾ office

  1. What is Andy’s opportunity cost of cleaning offices in terms of cleaning jail cells?

Cleaning 2 jail cells

  1. What is Hannah’s opportunity cost of cleaning offices in terms of cleaning jail cells?

4/3 of a jail cell

  1. What is Andy’s opportunity cost of cleaning jail cells in terms of cleaning offices?

Cleaning ½ of an office

  1. What is Hannah’s opportunity cost of cleaning jail cells in terms of cleaning offices?

Cleaning ¾ of an office

  1. Who has the absolute advantage in cleaning offices?

Hannah

  1. Who has the absolute advantage in cleaning jail cells?

Hannah

  1. Who has the comparative advantage in cleaning offices?

Hannah

  1. Who has the comparative advantage in cleaning jail cells?

Andy

  1. Who should do which chore and why?

Hannah should clean offices and Andy should clean jail cells because they will finish their chores sooner.The person with the lowest opportunity cost should do the chore.

US & JAPAN

US / JAPAN
Cars / 12 / 10
Computers / 4 / 6

US: JAPAN:

1 car = 1/3 computer 1 car = 3/5 computer

1 computer = 3 car 1 computer = 5/3 car

  1. What is the US’s opportunity cost of making cars?

For every car it must give up 1/3 of a computer

  1. What is Japan’s opportunity cost of making cars?

For every car it must give up 3/5 of a computer

  1. What is US’s opportunity cost of making computers?

For every computer it must give up 3 cars

  1. What is Japan’s opportunity cost of making computers?

For every computer it must give up 5/3 of a car

  1. Who has the absolute advantage in cars?

US

  1. Who has the absolute advantage in computers?

Japan

  1. Who has the comparative advantage in cars?

US

  1. Who has the comparative advantage in computers?

Japan

  1. Which country should produce which good and why?

US should make cars and Japan should make computers because each country can produce them for the lowest cost. The total output of computers and cars would be higher.