1.       How does an absolute advantage and a comparative advantage differ.

2.       Give an example in which you have an absolute advantage in doing something but your roommate (another person) has a comparative advantage.

3.       Which is  more important for trade: absolute advantage or comparative advantage? Explain your reasoning using the example you provided in the previous problem.

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

5.       Why might economists oppose policies that restrict international trade?

6.       American and Canadian workers can each produce 4 cars a year. An American worker can produce 10 tons of wheat a year, whereas a Canadian worker can produce 5 tons of wheat a year.

a.        Graph the production possibilities frontier of the American and Canadian economies.   (Let us pretend each country only has one worker so that we can use small numbers.)

b.       Which country has an absolute advantage in producing cars? In producing wheat?  Explain your answer.

c.      Which country has a comparative advantage in producing cars? In producing wheat?

d.        Explain what goods American and Canada could trade to improve.  Illustrate your answer on the graph.  Remember that 1 for 1 does not work.  It may need to be 2 for 1 or 1 for 2, etc.