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Principles Of Microeconomics Worksheet With Answer Key - Professor Dowell, Cosumnes River College Page 3

4. Workers in the United States and Brazil can produce shoes and computers. The annual

productivity of a worker in each country is given in the table below:

Country

Computers

Shoes

United States

5,000

8,000

Brazil

1,000

5,000

United States’ PPF

8,000

5,000

1,000

Computers

Brazil’s PPF

a. On the graphs above, draw each countries production possibilities frontier. For simplicity assume

each country has only one worker who works for the entire year. (Make sure you put the numbers on

the axes.)

b. Which country has the comparative advantage in each good? How do you know? Explain.

The slope of the PPF (rise/run) is the opportunity cost of what is on the vertical axis (shoes) in terms

of what is on the horizontal axis (computers). Hence, the slope is the opportunity cost of computers

measure in shoes. The invers of the slope is the opportunity cost of shoes in terms of computers.

These costs are shown in the table below:

Opportunity Cost

Country

1 Computer

1 Shoe

United States

8/5 shoe

5/8 computer

Brazil

5 shoes

1/5 computer

The U.S. must give up 8/5 of a shoe to produce a computer while Brazil must give up 5 shoes. The

U.S. has the lowest opportunity cost for computers and hence a comparative advantage in producing

them. The situation is just the opposite for Brazil. Brazils opportunity cost for a shoe is only 1/5 of a

computer. For the U.S., the opportunity cost of a shoe is 5/8 of a computer. Brazil has the lowest

opportunity cost for shoes and hence the comparative advantage.

Principles of Microeconomics: Problem Set 1 Solutions

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Principles Of Microeconomics Worksheet With Answer Key - Professor Dowell, Cosumnes River College Page 3