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Economics
Comparative Advantage: From Input to Output

Comparative Advantage: From Input to Output

Economics Grades High School 8:51 Video

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Lesson Description

Learn how to determine comparative advantage using the input approach, converting input data to output data, and calculating opportunity costs.

Video Resource

Input approach to determining comparative advantage | AP Macroeconomics | Khan Academy

Khan Academy

Duration: 8:51

Watch on YouTube

Key Concepts

Input vs. Output
Opportunity Cost
Comparative Advantage
Absolute Advantage

Learning Objectives

Students will be able to differentiate between input and output data in economic scenarios.
Students will be able to convert input data into output data.
Students will be able to calculate opportunity cost from output data.
Students will be able to determine comparative advantage based on opportunity costs.
Students will be able to understand the difference between comparative and absolute advantage.

Educator Instructions

Introduction (5 mins)
Begin by introducing the concept of comparative advantage and its importance in international trade. Briefly discuss output tables, which students may already be familiar with. Explain that this lesson will explore a different approach using input data.
Video Viewing (15 mins)
Play the Khan Academy video 'Input approach to determining comparative advantage' (https://www.youtube.com/watch?v=Uqf5c6Xcjr4). Instruct students to take notes on the key steps of converting input data to output data and calculating opportunity costs.
Guided Practice (20 mins)
Work through an example problem with the students, similar to the one in the video. Provide an input table and guide them through the process of converting it to an output table and calculating opportunity costs. Emphasize the logic behind each step. For example: Input Table: | Country | Hours to Produce 1 Widget | Hours to Produce 1 Gadget | |---|---|---| | X | 3 | 6 | | Y | 2 | 4 | Assume 12 working hours per day.
Independent Practice (15 mins)
Provide students with a new input table and have them independently convert it to an output table, calculate opportunity costs, and determine which country has a comparative advantage in each good. This could be done individually or in pairs. For example: Input Table: | Country | Hours to Produce 1 Unit of Corn | Hours to Produce 1 Unit of Steel | |---|---|---| | Alpha | 10 | 5 | | Beta | 6 | 3 | Assume 60 working hours per day.
Wrap-up & Discussion (5 mins)
Review the key concepts and address any remaining questions. Facilitate a short class discussion to reinforce understanding.

Interactive Exercises

Comparative Advantage Game
Divide the class into groups, assigning each group a country and a set of resources (labor hours). Provide input data for producing different goods. Have each group determine their comparative advantage and negotiate trade agreements with other groups.

Discussion Questions

Why is it important to understand comparative advantage when considering international trade?
Can a country have a comparative advantage in everything? Why or why not?
How might technological advancements affect a country's comparative advantage?

Skills Developed

Analytical Thinking
Problem Solving
Critical Thinking
Data Interpretation

Multiple Choice Questions

Question 1:

In economics, 'input' refers to:

The amount of goods produced.

The resources required to produce a good or service.

The final selling price of a product.

The consumer demand for a product.

Correct Answer: The resources required to produce a good or service.

Question 2:

An input table shows:

How much of a good can be produced with a given amount of resources.

The amount of resources needed to produce one unit of a good.

The total cost of production for all goods in a country.

The export and import quantities of different goods.

Correct Answer: The amount of resources needed to produce one unit of a good.

Question 3:

Converting an input table to an output table requires:

Dividing the total available resources by the input required per unit.

Multiplying the total available resources by the input required per unit.

Subtracting the input required per unit from the total available resources.

Adding the input required per unit to the total available resources.

Correct Answer: Dividing the total available resources by the input required per unit.

Question 4:

Opportunity cost is best defined as:

The total cost of producing a good or service.

The profit earned from selling a good or service.

The value of the next best alternative forgone when making a choice.

The amount of money spent on resources.

Correct Answer: The value of the next best alternative forgone when making a choice.

Question 5:

Comparative advantage refers to:

The ability to produce more of a good than another producer.

The ability to produce a good at a lower opportunity cost than another producer.

The ability to sell a good at a higher price than another producer.

The ability to export more goods than another producer.

Correct Answer: The ability to produce a good at a lower opportunity cost than another producer.

Question 6:

If Country A can produce one car with 10 hours of labor and one ton of steel with 5 hours of labor, while Country B can produce one car with 12 hours of labor and one ton of steel with 4 hours of labor, which country has the comparative advantage in steel?

Country A

Country B

Both countries have equal advantage

Neither country has an advantage

Correct Answer: Country B

Question 7:

What does it mean if a country has absolute advantage in producing a good?

It can produce the good at a lower opportunity cost than other countries.

It can produce more of the good with the same resources than other countries.

It should always export that good.

It should always import that good.

Correct Answer: It can produce more of the good with the same resources than other countries.

Question 8:

Why is it important for countries to specialize in goods for which they have a comparative advantage?

To reduce trade deficits

To increase domestic employment

To maximize their overall production and consumption possibilities.

To become self-sufficient.

Correct Answer: To maximize their overall production and consumption possibilities.

Question 9:

Which of the following is NOT needed to determine comparative advantage?

Input data

Output data

The price of the goods

Total available resources

Correct Answer: The price of the goods

Question 10:

Absolute advantage is different from comparative advantage because...

Absolute advantage leads to greater gains from trade.

Comparative advantage is based on opportunity costs, while absolute advantage is based on productivity.

Absolute advantage is more important in international trade.

Comparative advantage is easier to measure.

Correct Answer: Comparative advantage is based on opportunity costs, while absolute advantage is based on productivity.

Fill in the Blank Questions

Question 1:

An ________ table shows the amount of resources needed to produce one unit of a good.

Correct Answer: input

Question 2:

The value of the next best alternative forgone is known as ________ cost.

Correct Answer: opportunity

Question 3:

________ advantage exists when a country can produce a good at a lower opportunity cost than another country.

Correct Answer: comparative

Question 4:

To convert an input table to an output table, you divide the total available ________ by the input required per unit.

Correct Answer: resources

Question 5:

Even if a country has an ________ advantage in producing all goods, it can still benefit from trade.

Correct Answer: absolute

Question 6:

When determining comparative advantage, it is most important to analyze ________ rather than just production quantities.

Correct Answer: opportunity cost

Question 7:

Specialization occurs when a country focuses on producing goods and services where it has a ________ advantage.

Correct Answer: comparative

Question 8:

An output table displays the number of ________ of a good that can be produced with a given set of resources.

Correct Answer: units

Question 9:

Countries can benefit from ________ even if they are more productive than their trading partners.

Correct Answer: trade

Question 10:

The concept of comparative advantage helps explain the gains from ________ between countries.

Correct Answer: trade

Educational Standards

SOC.9-12.E.1.1:Define and apply basic economic concepts of money supply, scarcity, surplus, choice, opportunity cost, cost/benefit analysis, risk/reward relationship, incentive, disincentive, and trade-off to a variety of economic situations. SOC.9-12.E.2.5:Describe the impact of comparative and absolute advantage upon the three basic economic questions. SOC.9-12.E.1.2:Determine appropriate courses of economic actions using a variety of economic reasoning and decision-making models.

Teaching Materials

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