In your response post to your
classmate, comment on a classmate post whose simulations had different outcomes
than your own. Research and provide examples of companies in the news that are
relevant to your peers’ comments on the value of comparative advantage for
making their business decisions
Required: 2-3 paragraphs, 2 references in APA
format
***To
Essay pro writer***: Below is my classmate discussion post and attached in
another word document is my discussion post-
Heather
discussion post below
Hello everyone!
After completing the competitive advantage simulations, it
made it very clear to me that trading can be very beneficial. In the first
situation, without trade, my food truck could make four burgers or eight fries.
Since it would take me less time to make fries and more time to make burgers, I
decided to prepare more burgers. By spending 20 min making burgers and 10 min
making fries, I would be able to prepare 80 combos. In the second simulation with trade, I could
make 68 burgers and 104 fries. When I traded 16 fries for 20 burgers, I ended
up with 88 combos. This trade allowed me to trade fries, which I could make
quicker, to get more burgers. Allowing me to have eight more combos prepared.
Pictures of my results can be found below.
Figure 1. Competitive Advantage without trade
Figure 2. Competitive Advantage with trade
Opportunity cost is whatever that must be given up to get
something else (Mankiw, 2021). Fagan
uses the example of some finding $4000 (Fagan, 2020). That person could take a
vacation or invest that money and increase the money they have over time
(Fagan, 2020). Comparative advantage is
when someone can make something at a lower cost (Landsburg, 2019). Everyone has
a comparative advantage, which means everyone has something to gain from
trading (Landsburg, 2019). To determine who has the comparative advantage for a
product the opportunity cost of both parties needs to be compared (Landsburg,
2019). This information is helpful when making business decisions such as trading.
If I owned a business, I would want to trade products with companies that would
be more expensive for me to make and reduce the production of the product that
I have a lower opportunity cost in.
Figure 3. (n.d). Production Possibility Frontier for the
U.S. and Brazil. Retrieved from
https://www.khanacademy.org/economics-finance-domain/microeconomics/basic-economic-concepts-gen-micro/production-possibilities/a/the-production-possibilities-frontier-and-social-choices-cnx-2.
Above is an example of a production possibility frontier
model that focuses on the production of sugar cane and wheat in the United
States and Brazil (“The Production Possibilities Frontier”, n.d.). When looking
at the graphs, you can see Brazil can make more sugar cane per acre of land,
and the United States can make more wheat per acre of land (“The Production
Possibilities Frontier”, n.d.). This
indicates Brazil has a lower opportunity cost for sugar cane, while the United
States has a lower opportunity cost for wheat.
This also means they have a comparative advantage in these areas because
each country can produce the product at a lower cost than the other country
(Mankiw, 2021). Brazil can focus on
making sugar cane, and the United States can focus on wheat. This will allow
more of both products to be produced. Specialization and trading allow each
country to have more of a selection of products (Mankiw, 2021). Although it is
important to keep in mind that the trade must be between the opportunity cost
of each country or the trade won’t be beneficial (Mankiw, 2021).
Resources
Fagan, D. (2020, January 29). Real-life examples of
opportunity cost. Federal Reserve Bank of St. Louis.
https://www.stlouisfed.org/open-vault/2020/january/real-life-examples-opportunity-cost.
Landsburg, L. F. (2019). Comparative advantage. Econlib .
https://www.econlib.org/library/Topics/Details/comparativeadvantage.html.
Mankiw, N. G. (2021). Principles of microeconomics (#9
edition). Cengage.
The production possibilities frontier. (n.d.). Khan Academy.
https://www.khanacademy.org/economics-finance-domain/microeconomics/basic-economic-concepts-gen-micro/production-possibilities/a/the-production-possibilities-frontier-and-social-choices-cnx-2.