1. What was the most important document written in 1776?

2. What made The Wealth of Nations “THE” most important document written in 1776? Adam Smith wrote about a pin factory. What did they call the workers in the pin factory? Just a bunch of pinheads.

3. When he first observed the factory, he noticed that each worker was producing his or her own pins. By the end of the day, the total production by the workers was 20 pins. He stated that each worker should specialize in the production stage rather than produce his or her own pins. Through specialization, the total output by the factory increased to 48,000 pins per day. (Page 11, Wealth of Nations)

4. I am going to prove that specialization works. I am going to name a state and you tell me what that state specializes in: IdahoPotatoes FloridaOranges Texas Oil or cattle MichiganAutomobiles Nevada Any illegal activity that you can think of

6. Absolute and Comparative Advantage Betty types 120 w.p.m. with 0 errors Jim types 60 w.p.m. with 0 errors Who should do the typing, Betty or Jim? Betty.Why? Betty can type ABSOLUTELY faster than Jim can. What type of advantage does Betty have over Jim? Absolute Advantage

7. I forgot to tell you--Betty is a lawyer. A lawyer earns $60 an hour. A secretary earns $6 an hour. A 600-word document has to be typed, how long does it take each person to type this document? Betty is the lawyer. According to the information given, that makes Jim-- A secretary.

8. How long does it take Betty to type this document? How long does it take Jim to type this document? 5 minutes 10 minutes 600 divided by 120 = 5 600 divided by 60 = 10

9. How much would it cost each one to type this 600-word document? Betty Jim $5 $1 Betty receives $60 an hour or $1 per minute. It takes her 5 minutes to type the document. Jim receives $6 an hour or $1 for every 10 minutes. It takes him 5 minutes to type the document.

10. We know that it takes Betty 5 minutes to type the document, and it takes Jim 10 minutes to type the document. We also know that it costs Betty $5 to type the document, and it costs Jim $1 to type the document. According to this information, who should do the typing? Jim

11. Why should Jim do the typing? Because he has a-- Comparative Advantage One entity can produce something at a LOWER MARGINAL OPPORTUNITY PRODUCTION COST than another entity

12. Five minutes ago you told me that Betty should do the typing; now you are telling me that Jim should do the typing. Why? Because Jim has the comparative advantage. Which is more important in economics-- absolute or comparative advantage? Comparative Advantage

13. Take absolute advantage and KICK it out the window. The more important of the two is-- Comparative Advantage

14. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 Which country has the absolute advantage in the production of Maple Syrup? In Copper Wire?

15. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 What did I tell you to do with Absolute Advantage? Kick it out the window!

16. Man-hours required to produce 1 unit of a good U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 More importantly, which country has the Comparative Advantage in Maple Syrup? In Copper Wire? And Why?

17. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 1 1 + 11 + 15 U.S. 2 x 2 = 10 Canada 22 x= 14 U.S. saves one-man hour Canada saves one-man hours

18. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 1 1 + 11 + 15 U.S. 2x 2 = 10 Canada 22 x= 14 Should the U.S. keep the 2 barrels of maple syrup and Canada 2 miles of copper wire?

19. Man-hours required U.S. Canada Maple Syrup 5 8 Copper Wire 6 7 1 1 + 11 + 15 U.S. 2x 2 = 10 Canada 22 x= 14 No! The U.S. should trade one barrel of maple syrup for one mile of copper wire.