Period:____Name:_________________________

Comparative Advantage Practice

Comparative Advantage:

An individual has a comparative advantage over another in producing a particular good if
he/she can produce that good at a lower relative opportunity cost prior to trade.

The classical theory of comparative advantage explains why countries engage in international
trade even when one country's workers are more efcient at producing every single good than
workers in other countries. If two countries capable of producing the same two goods engage
in free trade, then the overall production will increase. In other words, each country will
increase its overall consumption (the using of resources/goods) by exporting the good for
which it has a comparative advantage, and importing the other good.

Question: Should Turkey and Canada trade?


1. Who has the absolute advantage in the production of apples: _______________________
2. Who has the absolute advantage in the production of logs: _________________________

3. Calculate the opportunity cost for each country to produce these goods:


Hint:

What we give up
______________

If we make







4. Who has the comparative advantage in the production of apples:_____________________

5. Who has the comparative advantage in the production of logs:_______________________
Production in One Day Apples Logs
Turkey 4 9
Canada 57 30
Opportunity Cost Apples Logs
Turkey
Canada
6. Calculate production in one day if these countries specialize based on lowest opportunity
cost:


7. What is the total production of apples and logs for two days (one day of apples, one day of
logs) WITHOUT specialization:_______

8. What is the total production of apples and logs for two days WITH specialization:_________

9. Should Turkey and Canada trade?
Explain why or why not using at least one piece of evidence.
Production in TWO DAYS
with specialization
Apples Logs
Turkey
Canada