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?

   • 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
   • 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
3. 2.

   Ari ranks the goods on card A by how much more time S needs than R. Which claim do the ratios support?

   • R should make each of the three goods, since R is faster at each of them
   • R's strongest advantage is cloth, because S needs 5 hours for it
   • R's strongest advantage is grain, because R needs just 2 hours for it, the fewest of any
   • R's strongest advantage is tools, then grain, and its weakest is cloth
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?

   • 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
   • Whatever price matches each country's hourly wage, since wages set what an hour is worth

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: a roll costs Y 1 bushel of wheat, against 2 bushels for X
   • Country X, because X makes 6 rolls and 12 bushels, the most of both
   • Neither, because both countries make 6 rolls per worker
   • Country Y, because Y makes 6 rolls per worker, the same number that X makes
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 Y does, because it now makes the most wheat of the two
   • 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 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 double, since Y now makes as much wheat as X
   • They grow, since Y becomes better at wheat than before
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?

   • 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
   • Not supported: at 18 wheat a roll costs Y 3 bushels, so Y gains buying cloth from X for under 3

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.

    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?

    • $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 home sellers and $120 to the government, since imports are taxed more
    • $40 goes to the government and $120 to home sellers, who get $2 more on each of 60 units
12. 9.

    A speaker says foreign sellers pay the $2 tariff. Ren tests the claim with cards A and B. What is the verdict?

    • Not supported: foreign sellers still receive $10 and home buyers pay $12, so buyers bear it
    • Not supported: the card does not say how many units foreign sellers sell at $10
    • Supported: imports fell, so foreign sellers lost $2 on each unit
    • Supported: the tariff is collected on foreign goods, so foreign sellers must be the ones who pay the $2
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?

    • How many units buyers wanted at $14
    • 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
    • Whether home sellers supply 60 units at $12