08 Jun Unit 2 [204]Page 1 of 3Unit 2 Assignment: Economic Models andComp
Unit 2 [204]Page 1 of 3Unit 2 Assignment: Economic Models andComparative Advantage1. Your Assignment should have a cover sheet with the following information:● Your Name● Course Number● Section Number● Date2. You may submit your Assignment using the Unit 2 Assignment template.3. Your answers should follow APA formatting by being in double-spaced paragraph format, withcitations to your sources and, at the bottom of your last page, a list of references. Your answersshould also be in Standard English with correct spelling, punctuation, grammar, and style.4. Respond to the questions in a thorough manner, providing specific examples of concepts, topics,definitions, and other elements asked for in the questions. Your answers should be highlyorganized, logical, and focused.Questions:According to the author, economists approach economic problems with economic models, andthese models will help familiarize you with how economists approach economic problems. Themodels also help explain how individuals and countries gain from trade. Accordingly, trade allowspeople to specialize in the production of goods and services for which they have comparativeadvantages and, then trade for goods and services that other people produce based on theircomparative advantages.The Assignment questions deal with the application of the economic models and the roles ofcomparative advantage in the gains from trade.1. Explain the difference between absolute advantage and comparative advantage. Which is moreimportant in determining trade between individuals or countries? Is it absolute advantage orcomparative advantage? Why?2. Assume two students must prepare a presentation for their marketing class. As part of their classpresentation, they must do a series of calculations and prepare 50 PowerPoint slides. It wouldtake Larry 10 hours to do the required calculation and 10 hours to prepare the slides. It would takeKate 12 hours to do the series of the calculations and 20 hours to prepare the PPT slides.A. How much time would it take the two students to complete the project if they divide the twotasks equally?B. How much time would it take the two students to complete the project if they usecomparative advantage and specialize in calculating or preparing slides?Unit 2 [204]Page 2 of 3C. If Larry and Kate have the same opportunity cost of $5 per hour, is there a better solutionthan for each to specialize in calculating or preparing slides?3. Assume there are only two countries in the world, and the two countries face the followingproduction possibilities frontiers. Further assume that the two countries produce popcorn andpeanuts.Country A’s Production Possibilities Frontier Country B’s Production Possibilities FrontierA. Assume that country A and country B decide to use half of the resources in the production of eachgood. Indicate the points of the maximum output of each good on the graphs for each country aspoint A under such resource use.B. Assume the two countries choose autarky and do not trade. What would be the total worldproduction of popcorn and peanuts under the autarky?C. Assume that each country decides to specialize in either popcorn or peanut based on itsrespective comparative advantage. Under the specialization, what is the total production ofpopcorn and peanuts?D. Assume country A and B decide to trade 100 units of popcorn for 100 units of peanuts, show onthe graphs the gain each country receives from trade. Label these points on the two graphs “B.”Directions for Submitting Your AssignmentBefore you submit your Assignment, you should save your work on your computer in a location andwith a name that you will remember. Make sure your Assignment is in the appropriate templateprovided. Then, when you are ready, you may submit to the Dropbox.Unit 2 [204]Page 3 of 3Unit 2 Assignment: Economic Models and Comparative Advantage PointsPossiblePointsEarnedContent and AnalysisProblem #1Effectively explained the difference between absolute advantage andcomparative advantage.6Problem #2Correctly calculated the time it would take to complete the project. (“a”)6Correctly computed the comparative advantages of Larry and Kate. (“b”) 6Identified the gains from trade on the graphs. (“c”) 5Problem #3Identified points on the graphs for the use of half of the resources. (“a”)5Calculated computed the total production without trade. (“b”) 5Calculated the total production with trade. (“c”) 6Explained the gains from trade when the goods have equal value. (“d”) 6Writing Style, Grammar, and APA formatting. 5Total 50
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