Comparative advantage: why trade can help both sides

Grade 12 Social Studies Worksheet - Challenge Me

Circle the best answer.

1. Read this first

   Use this

   Card A. Compare chart "Hours of work to make one unit" (made up for practice), columns Good | Country R | Country S: Grain | 2 hours | 3 hours; Cloth | 4 hours | 5 hours; Tools | 6 hours | 12 hours. Note: invented countries and figures, made up for practice. Each country can make any of the three goods.

2. 1.

   Zee reads card A. Country R is faster at all three goods. Which good should Country S make for trade, and why?

   • No good: S is slower at each of the three goods, so S should make nothing for trade
   • Cloth: S's hours are closest to R's there, 5 against 4, so S gives up the least
   • Grain: it takes S the fewest hours, 3, of any good
   • Tools: R needs just 6 hours, so S should make them to be the cheaper maker of the two
3. 2.

   A writer says S, slower at all three goods, gains nothing from trade with R. Bo tests this with card A. What is the verdict?

   • Not supported: the card has no wages, so the claim cannot be judged
   • Supported: R is faster at each good, so R has no need of anything S makes, so trade gives R nothing
   • Not supported: S gives up least in cloth, so S can gain by trading cloth for other goods
   • Supported: S is slower because it has less skilled workers than R
4. 3.

   Esme wants to say at what barter price R and S would trade tools for cloth. Which price lies inside the range where both gain?

   • Whatever price matches each country's hourly wage, since wages set what an hour is worth
   • 2 cloth per tool: above R's cost of 1.5 cloth and below S's cost of 2.4
   • 3 cloth per tool, because S's 12 hours for a tool is more than twice its 5 hours for a roll
   • 1 cloth per tool, since a tool takes R 6 hours and a roll takes R 4 hours, close to even

5. Use this

   Card A. Compare chart "Output per worker per day" (made up for practice), columns Country | Wheat (bushels) | Cloth (rolls): Country X | 12 | 6; Country Y | 6 | 6. Note: invented countries and figures, made up for practice. Each worker makes either wheat or cloth in a day. Card B, "A new method" (made up). Country Y finds a method that raises its wheat output per worker. Cloth output per worker stays the same in both countries.

6. 4.

   Jun uses card A before the new method. Which country has the comparative advantage in cloth, and what does a roll cost it?

   • Country Y, because Y makes 6 rolls per worker, the same number that X makes
   • Country X, because X makes 6 rolls and 12 bushels, the most of both
   • Country Y: a roll costs Y 1 bushel of wheat, against 2 bushels for X
   • Neither, because both countries make 6 rolls per worker
7. 5.

   Country Y's new method triples its wheat output to 18 bushels per worker. Kira uses cards A and B. Which country now has the comparative advantage in cloth?

   • Country X: a roll now costs X 2 bushels but costs Y 3 bushels
   • Neither does, because both countries now make the same wheat per worker
   • Country Y does, because it now makes the most wheat of the two
   • Country Y still does, since its cloth output per worker has not changed
8. 6.

   Instead, Y's new method doubles its wheat output to 12 bushels per worker. Luz uses cards A and B. What does that do to the gains from trade?

   • They disappear: a roll costs each country 2 bushels, so no price helps both
   • Just X gains, since X still makes the same cloth per worker as before the change
   • They grow, since Y becomes better at wheat than before
   • They double, since Y now makes as much wheat as X
9. 7.

   A writer says Y's new method means Y no longer gains from any trade. Milo tests this with cards A and B. What is the verdict?

   • Not supported: at 18 wheat a roll costs Y 3 bushels, so Y gains buying cloth from X for under 3
   • Shown: a country with better technology has no use for trade, since it can make everything itself
   • Refuted: Y's cloth output rose, so Y now has the comparative advantage
   • Unsupported: card B does not say how much wheat Y makes now

10. Use this

    Card A. Compare chart "A market for one good, per month" (made up for practice), columns Price | Quantity buyers want | Quantity made at home: $10 | 100 | 40; $11 | 90 | 50; $12 | 80 | 60; $13 | 70 | 70. Note: invented market, made up for practice. Whatever this country buys from abroad costs $10 a unit at the border. Card B, "A $2 tariff" (made up). The country charges a tax of $2 on each unit it imports. Foreign sellers still receive $10 a unit. Buyers at home then pay the border price plus $2, and sellers at home can charge the same.

11. 8.

    Noah reads cards A and B. With free trade at $10, then with the $2 tariff, what happens to imports?

    • Imports fall from 60 to 20 units a month; buyers want 80 and home sellers supply 60
    • Imports fall to zero, since the tariff makes foreign goods cost more
    • Imports rise from 60 to 80, since home buyers want more at $12
    • Imports fall from 100 to 80 units a month, since buyers want 80 at the new price of $12
12. 9.

    Pia adds up what buyers at home pay because of the tariff. Which statement about the extra $160 on the 80 units is best supported?

    • $40 goes to home sellers and $120 to the government, since imports are taxed more
    • $160 goes to the government, since the tariff is a tax on buyers
    • $160 goes to foreign sellers, who raise their price by $2
    • $40 goes to the government and $120 to home sellers, who get $2 more on each of 60 units
13. 10.

    A supporter says the $2 tariff is worth it because it adds 20 units of home production. Tala looks for the missing evidence. Which matters most?

    • The border price of the good in a year before this one, such as $9, to compare with $10
    • What the extra 20 units cost home sellers and what the jobs are worth, against the $160
    • How many units buyers wanted at $14
    • Whether home sellers supply 60 units at $12