This lesson covers Topic 1.4 in the AP Syllabus.Today we will learn about the theory of comparative advantage and specialization and trade. You should have read the text chapter identified below in the homework section and watched the related videos. This page contains all the information you need for today's class. Use the table of contents on the right to help you navigate.
Learning Target: Analyze the role of comparative advantage in international trade of goods and services.
Criteria for Success
I will be able to use ideas related to firm theory to analyze economic problems.
I will be able to demonstrate this understanding using a graph of the aforementioned model.
Assignments
Unit 1 Formative #1
Explanation of MCQ's (at home)
Explanation of FRQ (in class)
Read: Krugman (Module 4)
Watch: The video lecture for today's topic (linked above). Ignore the join codes in the video. Those were from a previous year. I will send you new join codes soon.
Required problem set: Do this problem set to learn how to do comparative advantage problems and get practice in doing them. Click here to see the answers to the problem set.
Optional: The videos linked below
Formative Assessment (MCQ's): You will take a formal assessment during class. The assessment will consist of multiple-choice questions and one FRQ from an old AP Exam. Doing the problem of the day and ensuring that you understand it will help you prepare for today's formative assessment and help to ensure that you understand the concepts in this lesson.
Problem of the Day
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. Assume each country has 100 million workers.
Graph the production possibilities frontier of the American and Japanese economies.
For the United States, what is the opportunity cost of a car? Of grain?
For Japan, what is the opportunity cost of a car? Of grain?
Which country has the absolute advantage in the production of cars? Grain?
Which country has the comparative advantage in the production of cars? Grain?
Assume that originally there is no trade between Japan and the U.S. Identify an example in which trade makes both countries better off.