AP Microeconomics Page 1 of 1

Assignment: Apply Concepts of Production and Trade

1. Understanding the difference between absolute and comparative advantage

is not easy. Define absolute advantage and comparative advantage in your
own words. (10 points)
Absolute advantage means that someone has the ability to produce a good or service using fewer
resources than other producers. Comparative advantage means that someone has a lower
opportunity cost or sacrifices less production.
2. Alex and Edgar are police detectives in the seaside town of Marina. They’re
both applying for the Captain position that recently opened. The captain’s job
is mostly administrative and isn’t directly related to the capture and conviction
of criminals. Alex is a very good officer. He has a high rate of apprehension
and conviction of criminals on the cases he works on. Alex also does an
excellent job writing up reports on the cases he deals with. Edgar, on the
other hand, is not very good at solving crimes or handling paperwork. He’s
been on the police force for a number of years, as Alex has, but he excels at
nothing. Suppose you’re the police commissioner. Using the economic
concepts of absolute and comparative advantage, state whom you will
promote to the Captain’s job, Alex or Edgar. Explain your choice. (10 points)
Reading this passage, we get the information that Alex has absolute advantages in both paperwork
and solving crimes. However, it is hard to know who has the comparative advantage in each task
because there is no numerical information to compare their skills. Since there is numerical
information, it is difficult to calculate the opportunity costs. Without the information I need, I do
not know who has a comparative advantage on paperwork, and, thus I would just choose Alex as
the captain since he at least has an absolute advantage on paperwork. Also, I think that the captain
position is a very important position and someone who is good at handling paperwork should have
the position. When Alex becomes captain, he might be missing in the field, but other police
detectives can work hard in solving crimes.
3. A society in which the producers in the economy specialize will have a
greater production potential than a society without specialization. List and
explain the three things that specialization does to increase production. (15
points)
Specialization can improve the skills of workers because they focus on one task. Specialization can
also save time because workers don’t use extra time to change between tasks. Finally,
specialization promotes economic growth through innovation. Since people are holding on one
work for a long time, it is easier for them to make innovation.
4. Economic Growth

A. If an economy is experiencing economic growth, what happens to its

PPF? Show your answer on a graph, using the nation of Hypothetica,
where the people produce Exes and Wies. (5 points)
The PPF would shift outwards.
 B. Give an example of something that would cause economic growth
in Hypothetica. (5 points)
If there are more workers (resources) for producing Exes and Wies, there would be economic
growth.
5. International Trade

A. Why does free and voluntary trade increase wealth? (5 points)

Free and voluntary trade increase wealth because both nations participating in the trade would
benefit. When nations specialize where they have a comparative advantage, resources are used
efficiently.
B. Since free trade increases wealth, some argue that all trade barriers should
be removed. Argue for and against removing existing trade barriers. (10
points)
Trade barriers make people buy goods and services that one producer didn’t produce as efficiently
as another producer. Thus, the trade barriers increase the cost of buying the efficiently made goods
or services, and interfere with putting resources to most efficient use. When existing trade barriers
are removed, resources can be used more efficiently.
On the other hand, removing existing trade barriers can destroy traditional cultures and sensitive
environments. For example, people loss jobs and income.

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