Comp. input - least effort to make 1
For Comparative Advantage Output Questions:
- The country that can produce the most, with similar resources as another country, has the absolute advantage.
- Make opportunity cost comparisons.
- The country with the lowest opportunity cost has the comparative advantage and will make that product.
- Each country will seek a trade that is BETTER than their own domestic opportunity cost. If they can’t do better in trade than they could produce on their own, then they don’t trade.
- When each country trades, based on lowest opportunity cost, both can gain more in trade than they could produce domestically. Therefore, they can “exceed” their own production frontiers.
- The country that can produce a set amount of something by using the least resources, land, or time, has the absolute advantage.
- Make opportunity cost comparisons by creating an “output” matrix first. Do this by deciding for each product, what would be spent if a set unit was produced.
- The country with the lowest output opportunity cost will, again, have the comparative advantage.
- Output Question: "Other goes over"
- Input Question: "Other goes under"
