1. Give an example in which one person has an absolute advantage in doing something but another person has a comparative advantage.

2. Is absolute advantage or comparative advantage more important or trade? Explain your reasoning using the example in your answer to Question 3.

3. Will a nation tend to export or import goods for which it has a comparative advantage?

 4. American and Japanese workers can each produce 4 cars a year. An American worker can produce 10 tons of grain a year, whereas a Japanese worker can produce 5 tons of grain a year. 

                a. Graph the production possibilities frontier of an American and Japanese worker

                b. For the United States worker, what is the opportunity cost of a car? Of Grain? For Japan worker, what is the opportunity cost of a car? Of grain? 

                d. Which worker has an absolute advantage in producing cars? In producing grain?

                e. Which worker has a comparative advantage in producing cars? In producing grain?

                f. Without trade, the workers produce  half cars and half produce grain. What quantities of cars and grain does each worker produce?

                g. Starting from a position without trade, give an example in which trade makes each worker better off.

 5. Are the following statements true or false? Explain in each case.

                a. “Two countries can achieve gains from trade even if one of the countries has an absolute advantage in the production of all goods.”             

                b. “Certain very talented people have a comparative advantage in everything they do”

                c. “If a certain trade is good for one person, it can’t be a good trade for the other one.

                d. “If a certain trade is good for one person, it is always a good trade for the other one.”

                e. “If trade is good for a country, it must be good for everyone in the country.”