jump to content of this page Bized logo linked to homepage
You are here: Home > Educators > HE Resources > Threshold Concepts > Comparative Advantage

Educators
Bookmark and Share

Advanced

Reflective Exercise: Comparative Advantage

Learning Focus

Developing an understanding of comparative advantage and using this in the argument against tariffs.

Threshold Concepts

Those pivotal to this learning are

  • Opportunity Cost
  • General Equilibrium (trade as a non-zero sum game)

The threshold concept of economic modelling is also used.

Guide to the Multi-response Questions

Throughout this series of activities, you will be asked to make selections from a list in relation to a question. In selecting a box, you are making a choice that the statement relating to that box is correct; if you choose not to select a box, you are making a choice that this is not correct. When you have made your selection, select the 'mark' button and you will be given a response as below.

Question screengrab

What this tells me is that choice a) is not appropriate. By not selecting it I have made the right choice and I will receive a tick. I selected box b) but this is incorrect and so I receive a cross against that choice. C) is a correct response and I selected that so I get a tick and so on. If you have made all the right choices of both appropriate and non-appropriate responses, therefore, you will get all green ticks. Good luck!

The Problem

'Should a country that is less efficient in producing goods use import controls to reduce imports from other countries? Should we make or buy?'

This exercise examines the international trade problem above. This is an important problem, as related to this are a number of important questions that are subject to economic debate such as:

  • Should we protect the manufacturers of certain goods from international competition?
  • Or should we impose tariffs or quotas on imports?
  • Should we subsidise exports?
  • Is free trade desirable?

Setting the framework

In order to answer this we are going to illustrate the effects of trading by examining an example. Review your answers in the light of the economists' approach, given after each question. Were your answers the same? If not, why not?

Which of the following alternatives do you think is more appropriate for examining an example illustrating this problem?

(Tick however many of the following you think appropriate)

(a) Two countries and two products
(b) Three countries and three products
(c) Many countries and many products
(Tick however many of the following you think appropriate)

(a) If a country produces more of one good, this will not have an effect on the amount of other goods it produces
(b) If a country produces more of one good, they will be able to produce less of other goods
(c) If a country produces more of a product, they will be able to produce it more efficiently
(Tick however many of the following you think appropriate)

(a) A better situation is where more of all goods are produced (and consumed)
(b) A better situation is where less goods are produced as this will reduce pollution
(c) A better situation is where either more of good A and less of good B OR more of good B and less of good A are produced

There are also other fundamental assumptions in the background to our approach which you will examine (and perhaps reject, or reject in some circumstances) when these are discussed as the topic is further developed in your course.

The approach is to not introduce unnecessary complications into the example. Start with the simplest.

Go here for a further interactive question on the subject, and compare your answer with an economist's.

| Index | Previous | Next |