Worksheet 1 - Understanding Comparative Advantage

Worksheet 1: Understanding Comparative Advantage

Your Country: Austrailia

Directions: Complete this worksheet.

Suppose the US can produce 100 shirts or create 50 software programs, and that Honduras can produce 60 shirts or 20 software programs. Graph and label the production possibilities curves below for each country. Assume that the production possibilities curves are linear. (Choose ‘Insert-Shape’ and then choose the line tool to make your graphs.)

Shirts

100

50

50 100 Software

1. What is the opportunity cost of producing a shirt in the US, stated in terms of software programs? (Show how you calculated your answer.)

2. What is the opportunity cost of producing a shirt in Honduras, stated in terms of software programs?

3. Which country has a comparative advantage in shirt production? How do you know?

4. Go to the CIA Fact Book, https://www.cia.gov/the-world-factbook/ Look up your country, and write down three major Exports and three major Imports

Imports: 1)_______________, 2)_____________________, 3)________________

Exports: 1)_______________, 2)_____________________, 3)_________________