Macro/micro homework 2 1. Define comparative advantage. 2. Define absolute advantage. 3. Why would one country trade with another country? 4. Tina can produce any of the following combinations of goods x and y: a) 100x and 0y, b)50x and 25y, and c) 0x and 50y. David can produce any of the following combination of goods x and y: a) 50x and 0 y, b), 25x and 40y, and c) 0x and 80y. Who has a comparative advantage in producing good x? of good y? Explain your answer. Using the data in problem 6, prove that both Tina and David can be made better off through specialization and trade. List the sources of an economic growth as listed in the book 7. Comparative advantage and trade allows individuals and nations to consume levels of goods and services beyond the production possibilities frontier. To grasp this concept, how would your life change if a) you could only buy American made goods, b) you could only buy goods made in Texas, c) made in Austin. Read the discussion on "economic freedom" and "income" in the book. p. 64 a) What is the statistical relationship between economic freedom and income? b) go to the Heritage Foundation website and describe their political ideology. Should they be trusted as an objective source of information? c)If they can be trusted, what do you think about the causality? i.e. Does economic freedom lead to higher income or vice versa? Land as a productive resource includes farm acreage uranium deposits river systems all of the above 10. Janine is an accountant who makes $30,000 a year. Robert is a college student who makes $8,000 a year. All other things being equal, who is more likely to stand in a long line to get a concert ticket. What economic concept must be used to answer this