Comparative Advantage Worksheet Directions: For each problem, answer the questions below after creating a cost ratio table: 1. Is this an OUTPUT or an INPUT based problem? 2. Who has absolute advantage for each item? 3. Who has comparative advantage for the first product (A)? 4. Who has comparative advantage for the second product (B)? Remember: (OOO) Output problems: Opportunity cost goes Over (IOU) Input problems: Opportunity cost goes Under Example: Michigan requires 5 labor hours per unit of fudge (A) produced and 10 labor hours per unit of mittens (B). Ohio requires 8 labor hours per unit of fudge and 20 hours per unit of wool. Fudge (A) Mittens 1. Input or Output? Input (B) 2. Who has an absolute advantage? Michigan in both Michigan |5/10=0.5 |10/5= 2 products 3. Who has a comparative advantage for Product A? Ohio Ohio 8/20=0.4 20/8=2.5 4. Who has a comparative advantage for Product B? Michigan 1. The US can produce 30 tons of sugar beets (A) or 30 tons of corn (B). Russia can produce 40 tons of sugar beets or 20 tons of corn. Sugar Beets Corn (B) 1. Input or Output? (A) 2. Who has an absolute advantage? US B. Who has a comparative advantage for Product A? Russia 4. Who has a comparative advantage for Product B? 2. Montana requires 3 labor hours per unit of wheat (A) produced and 9 labor hours per unit of wool (B). Nebraska requires 20 labor hours per unit of wheat and 40 hours per unit of wool. Wheat (A) |Wool (B) 1. Input or Output? 2. Who has an absolute advantage? Montana 3. Who has a comparative advantage for Product A? Nebraska 4. Who has a comparative advantage for Product B?3. Turkey needs 10 acres of land to grow 100 bushels of cotton (A) and 5 acres to grow 100 bushels of tomatoes (B). Spain needs 6 acres to grow 100 bushels of cotton (A) and 2 acres to grow 100 bushels of tomatoes (B). Cotton (A) Tomatoes 1. Input or Output? B 2. Who has an absolute advantage? Turkey 3. Who has a comparative advantage for Product A? 4. Who has a comparative advantage for Product B? Spain 4. Thomas can bake 4 cheesecakes (A) or 6 brownies (B) at a time. Maddy can bake 8 cheesecakes or 16 brownies at a time. Cheesecakes Brownies 1. Input or Output? (A B 2. Who has an absolute advantage? Thomas 3. Who has a comparative advantage for Product A? 4. Who has a comparative advantage for Product B? Maddy