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5 Set up a Ricardo type comparative advantage numerical example wit

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5. Set up a Ricardo-type comparative advantage numerical
example with two countries and two goods. Distinguish
Solution
A person has a comparative advantage at producing
something if he can produce it at lower cost than anyone
else.
Having a comparative advantage is not the same as being
the best at something. In fact, someone can be completely
unskilled at doing something, yet still have a comparative
advantage at doing it! How can that happen?
First, let\'s get some more vocabulary. Someone who is the
best at doing something is said to have an absolute
advantage. Michael Jordan has an absolute advantage at
basketball. For all I know, Michael Jordan may also be the
fastest typist in the world, giving him an absolute
advantage at typing, too. Since he\'s better at typing than
you, can\'t he type more cheaply than you? That is, if
someone has an absolute advantage in something,
doesn\'t he automatically have a comparative advantage in
it?

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The answer is no! If Jordan takes time out from shooting
hoops to do all his own typing, he sacrifices the large
income he earns from entertaining fans of basketball. If,
instead, his secretary does the typing, the secretary gives
up an alternative secretarial jobor perhaps a much lower
salary playing basketball. That is, the secretary is the
lower-cost typist. The secretary, not Michael Jordan, has
the comparative advantage at typing! The trick to
understanding comparative advantage is in the phrase
\"lower cost.\" What it costs someone to produce
something is the opportunity costthe value of what is given
up. Someone may have an absolute advantage at
producing every single thing, but he has a comparative
advantage at many fewer things, and probably only one or
two things. (In Jordan\'s case, both basketball and also as
an endorser of Nike.)
Amazingly, everyone always has a comparative advantage
at something. Let\'s look at another example. Suppose you
and your roommate want to clean the house and cook a
magnificent Chicken Kiev dinner for your friends one night.
The easy case is when you are each better at one activity.
If you are an accomplished chef, while your roommate
doesn\'t know the range from the oven; and if after you
vacuum the carpet the dust bunnies have shifted from
under the sofa to under the coffee table, while your

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5. Set up a Ricardo-type comparative advantage numerical example with two countries and two goods. Distinguish Solution A person has a comparative advantage at producing something if he can produce it at lower cost than anyone else. Having a comparative advantage is not the same as being the best at something. In fact, someone can be completely unskilled at doing something, yet still have a comparative advantage at doing it! How can that happen? First, let\'s get some more vocabulary. Someone who is the best at doing something is said to have an absolute advantage. Michael Jordan has an absolute advantage at basketball. For all I know, Michael Jordan may also be the fastest typist in the world, giving him an absolute advantage at typing, too. Since he\'s better at typing than you, can\'t he type more cheaply than you? That is, if someone has an absolute advantage in something, doesn\'t he automatically have a comparative advantage in it? The answer is no! If Jordan takes time out from shooting hoops to do all his own typing, he sacrifices the large income he earns from entertaining fans of basketball. If, instead, his secretary does the typing, the secretary gives up an alternative secretarial jobor perhaps a much lower salary playing basketball. That is, the secretary is the lower-cost typist. The secretary, not Michael Jordan, has the comparative advantage at typing! The trick to understanding comparative advantage is in the phrase \"lower cost.\" What it costs someone ...
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