Economics of Globalization – Production Possibilities in the

Economics of Globalization – Production Possibilities in the

Economics of Globalization Questions

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Students, here are some supplemental videos that cover production possibilities, absolute advantage, and comparative advantage.

Production Possibilities in the movie Monsters, Inc.:

Absolute vs. Comparative Advantage:

Take a look at the following sets of production possibilities for two countries, Alpha and Omega:

Alpha’s production possibilities:

 

 
 

A B C D

E

Steel (tons) 60 45 30 15

0

Wheat (tons) 0 15 30 45

60

Omega’s production possibilities:

 

 

 

A B C D

E

Steel (tons) 20 15 10 5

0

Wheat (tons) 0 15 30 45

60

Answer the following questions:

1. Which country has an absolute advantage in steel production?

2. Which country has a comparative advantage in wheat production?

3. If, under self-sufficiency, both countries produce at point C on their respective Production Possibilities, how much total production will there be of steel and wheat?

4. If both countries specialize based on comparative advantage, how much total production will there be of steel and wheat?