A.P. Economics:
Comparative Economics FRQ rubric
_____ a) Wheat: neither country has the absolute advantage - identical outputs with the
same resources
Cloth: Country B, as it produces more output (with the same resources)
_____ b) Country A has the comparative advantage in wheat; Country B in cloth
_____
show opportunity costs: Country A: C = W
Country B: C = 1/3 W
W=C
W = 3C
Country A has the comparative advantage in wheat because it has the lower
opportunity cost in the production of this product (A's opportunity cost of
producing wheat is one cloth while B's cost is 3 cloths); Country B has
the comparative advantage in cloth because of its lower opportunity cost
in that product (B's opportunity cost of 1 cloth is 1/3 wheat while A's
opportunity cost is 1 wheat).
_____ c) Country B will import wheat because it has the comparative advantage in cloth. (it
will specialize in cloth production, getting its wheat more cheaply through trade)
(OR Country B will import wheat because the opportunity cost of wheat is higher
than
in Country A)
_____ d) for Country B, via trade a unit of wheat only costs 2 units of cloth, while its domestic
production of wheat would cost 3 units of cloth
(OR trade increases B's consumption possibilities by making it possible to consume
more of both goods)