"OOO" Method to calculate Comparative Advantage

1. Country Corn Opportunity Cost
of
1 bushel of Corn
In terms of Wheat
Wheat Opportunity Cost
of
1 bushel of Wheat
In terms of Corn
US 20C 40W
BRAZIL
30C 90W
Output Problem. Corn and Wheat are the OUTPUTS as a result of using
INPUTS such as Land (acres) and Labor.

2. Country Corn Opportunity Cost
of
1 bushel of Corn
In terms of Wheat
Wheat Opportunity Cost
of
1 bushel of Wheat
In terms of Corn
US 20C
40W
1 Corn = _____
20C
1C = 2W
40W
BRAZIL
30C 90W
Output Problem. Corn and Wheat are the OUTPUTS as a result of using INPUTS such as
Land (acres) and Labor.
“OOO” stands for “OUTPUT: OTHER OVER”.
CORN (US): When determining the Opportunity Cost of one good (Corn), you take the quantity
of the “OTHER” good (Wheat) and put it OVER Corn to form a ratio of Wheat-to-Corn.
When you reduce 40W/20C you get 1C = 2W.
“OVER”

3. Country Corn Opportunity Cost
of
1 bushel of Corn
In terms of Wheat
Wheat Opportunity Cost
of
1 bushel of Wheat
In terms of Corn
US 20C
40W
1 Corn = _____
20C
1C = 2W
40W
BRAZIL
30C
90W
1 Corn = _____
30C
1C = 3W
90W
Output Problem. Corn and Wheat are the OUTPUTS as a result of using INPUTS such as
Land (acres) and Labor.
“OOO” stands for “OUTPUT: OTHER OVER”.
CORN (BRAZIL): When determining the Opportunity Cost of one good (Corn), you take the
quantity of the “OTHER” good (Wheat) and put it OVER Corn to form a ratio of Wheat-to-Corn.
When you reduce 90W/30C you get 1C = 3W.
“OVER”

4. Country Corn Opportunity Cost
of
1 bushel of Corn
In terms of Wheat
Wheat Opportunity Cost
of
1 bushel of Wheat
In terms of Corn
US 20C
40W
1 Corn = _____
20C
1C = 2W
40W
20C
1 Wheat = _____
40W
1W = ½ (or .5) C
BRAZIL 30C
90W
1 Corn = _____
30C
1C = 3W
90W
Output Problem. Corn and Wheat are the OUTPUTS as a result of using INPUTS such as
Land (acres) and Labor.
“OOO” stands for “OUTPUT: OTHER OVER”.
WHEAT (US): When determining the Opportunity Cost of one good (WHEAT), you take the
quantity of the “OTHER” good (CORN) and put it OVER WHEAT to form a ratio of
Corn-to-Wheat.
When you reduce 20C/40W you get 1W = ½ (.5)C.
“OVER”

5. Country Corn Opportunity Cost
of
1 bushel of Corn
In terms of Wheat
Wheat Opportunity Cost
of
1 bushel of Wheat
In terms of Corn
US
20C 40W
1 Corn = _____
20C
1C = 2W
40W 20C
1 Wheat = _____
40W
1W = ½ (or .5) C
BRAZIL 30C
90W
1 Corn = _____
30C
1C = 3W
90W
30C
1 Wheat = _____
90W
1W =1/3 (or .33) C
Output Problem. Corn and Wheat are the OUTPUTS as a result of using INPUTS such as
Land (acres) and Labor.
“OOO” stands for “OUTPUT: OTHER OVER”.
WHEAT (BRAZIL): When determining the Opportunity Cost of one good (WHEAT), you take
the quantity of the “OTHER” good (CORN) and put it OVER WHEAT to form a ratio of
Corn-to-Wheat.
When you reduce 30C/90W you get 1W = 1/3 (.33)C.
“OVER”

6. Country Corn Opportunity Cost
of
1 bushel of Corn
In terms of Wheat
Wheat Opportunity Cost
of
1 bushel of Wheat
In terms of Corn
US
20C 40W
1 Corn = _____
20C
1C = 2W
40W 20C
1 Wheat = _____
40W
1W = ½ (or .5) C
BRAZIL 30C
90W
1 Corn = _____
30C
1C = 3W
90W
30C
1 Wheat = _____
90W
1W =1/3 (or .33) C
Output Problem. Corn and Wheat are the OUTPUTS as a result of using INPUTS such as
Land (acres) and Labor.
“OOO” stands for “OUTPUT: OTHER OVER”.
Now to answer the important questions
1. Which country produces Corn (Wheat) at the LOWEST Opportunity Cost?
2. Which country is SPECIALIZES in Corn (Wheat)?
3. Which country EXPORTS Corn (Wheat)? Imports Corn (Wheat)?