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Copy of Should LeBron James mow his own lawn?

Discussion on absolute advantage, comparative advantage, specialization and trade. Courtesy of Scott Niederjohn.

LaShawna Campbell

on 8 February 2013

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Transcript of Copy of Should LeBron James mow his own lawn?

Should LeBron James mow his own lawn? Warm Up Questions Should a country produce everything it wants? If Country A is better than Country B at producing everything, would Country A gain anything by trading with Country B? When a new home is built, why doesn't one person do the carpentry, electrical, plumbing and landscaping? Opportunity Cost:

Comparative Advantage:

Law of Comparative Advantage:

Absolute Advantage: the value of the next best alternative.

is the ability to produce something at a lower opportunity cost than other producers.

an individual, firm, region or country with the lowest opportunity cost of producing a good should specialize in that good.

is the ability to produce something using fewer resources than other producers. The LeBron James Scenario Now lets assume LeBron is as good a lawn mower as he is a basketball player.

However, LeBron has a young neighbor named Jordan who is willing to mow his lawn.

LeBron can mow his own lawn in two hours. He could also film a commercial for Nike in two hours and make $10,000. So, James' opportunity cost of mowing his lawn is $10,000.

The neighbor Jordan can mow LeBron's lawn in four hours. He could also work at McDonald's for four hours and make $8 per hour. So, Jordan's opportunity cost of mowing LeBron's lawn is $32. Questions: Who has an absolute advantage in mowing the lawn?

Who has comparative advantage in mowing the lawn?

Would LeBron and Jordan benefit from a trade? We can apply this to many real world examples. This analysis suggests that we should specialize in what we're good at and trade with others for other things we want. Such a rule explains why:

1. We generally don't grow our own food.

2. Factories often use assembly lines.

3. Basketball or football players often specialize in one position as opposed to playing all of them.

4. Your teacher may teach geography, history, and government but likely does not also teach physical education and chemistry. Application Questions:
Independently, answer questions #8 & #9 on page 26 in your textbook.
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