ECON 203 Lecture 2: Econ 203 CH.2

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ECON 203 Full Course Notes
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Q1. 5) one of the trade-offs bmw faces is between safety and gas mileage. For example, adding steel to a car makes it safer but also heavier, which results in lower gas mileage. Draw a hypothetical production possibilities frontier that bmw engineers face that shows this trade-off. 2. 4 using the same amount of resources, the united states and canada can produce lumberjack shirts and lumberjack boots, as shown in the following production possibilities frontiers. Canada has the comparative advantage in making boots. Canada"s opportunity cost of making one boot is giving up one shirt. In the united states, the opportunity cost of making one boot is giving up three shirts. The united states has the comparative advantage in making shirts. Neither country has an absolute advantage in making both goods. The united states has the absolute advantage in shirts, but canada has the absolute advantage in boots. Remember, both countries have the same amount of resources.

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