01 May Question: 2. Comparative and absolute advantage Shen and Valerie are farmers. Each one owns a 12-acre plot …
2. Comparative and absolute advantage Shen and Valerie are farmers. Each one owns a 12-acre plot of land. The following table shows the amount of barley and alfalfa each farmer can produce per year on a given acre. Each farmer chooses whether to devote all acres to producing barley or alfalfa or to produce barley on some of the land and alfalfa on the rest. Barley (Bushels per acre) 18 28 Alfalfa (Bushels per acre) Shen Valerie
On the following graph, use the blue line (circle symbol) to plot Shen’s production possibilities frontier (PPF), and use the purple line (diamond symbol) to plot Valerie’s PPF. 120 T 108 Shen’s PPF 90 84 72 Valerie’s PPF 60 48 38 24 12 0 60 20 180 240 300 30 420 480 600 BARLEY (Bushels) has an absolute advantage in the production of barley, and has an absolute advantage in the production of alfalfa Shen’s opportunity cost of producing 1 bushel of alfalfa is alfalfa is bushels of barley, whereas Valerie’s opportunity cost of producing 1 bushel of bushels of barley. Because Shen has a opportunity cost of producing alfalfa than Valerie has a comparative advantage in the production of barley. has a comparative advantage in the production of alfalfa, and
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