Group+4+Comparative+Advantage

**//Week 1: The Gains from Trade//**
The United States has 50,000 hours of labor with which it can produce either cars or shirts. It takes 25 hours to produce a shirt, and 100 hours to produce a car.
 * 1) Graph the U.S. production possibility frontier (PPF), with the quantity of cars on the vertical axis.
 * 2) What is the opportunity cost of producing a shirt (in terms of cars) in the United States?
 * 3) Now assume that Mexico can also produce corn and tractors with its 15,000 hours of labor. However, in Mexico it takes 25 hours to produce a shirt and 25 hours to produce a car. Graph Mexico's PPF. What is the opportunity cost of producing shirts in Mexico?
 * 4) Which country has the absolute advantage in producing shirts? Which country has the absolute advantage in producing cars? Explain your answer.
 * 5) Should these two countries trade? Why or why not? If they should trade, which product should the United States specialize in, and why?