Module two simulation discussion
For your post, do the following:
• Include your simulation report file and your text responses that follow the instructions in the prompt.
In your initial post, include the image of your simulation report in your response.
Imagine you own your own business. How would you evaluate opportunity costs and comparative advantage when making business decisions?
• Look up a Production Possibilities Frontier (PPF) graph. What role does the production possibility frontier (PPF) model have in making business decisions regarding specialization and trade?
Explain how they would evaluate opportunity costs and comparative advantage when making business decisions.
Articulate the role that production possibility frontier (PPF) model has in making business decisions regarding specialization and trade.
Respond to the post below with examples of companies in the news that are relevant to the post. Comment on the value of comparative advantage for making professional decisions.
In order for my business to be most profitable, I would have to thoroughly examine opportunity costs with each decision I make to allow myself to decide whether or not I am making decisions on time and money efficiently. For example, if I owned a telecommunications company and I had the opportunity to move into a new market, I would have to examine the investment up front and figure out what I could give up making this new investment profitable. Comparative advantage is defined as the ability to produce a good at a lower opportunity cost than another producer (Mankiw, 2021). It would be imperative to examine comparative advantage versus another company when working with them to trade. If another company approached me wanting to work together on the use of equipment in the telecommunications industry, I would have to carefully examine who had the comparative advantage in producing equipment. This would allow me to decide whether or not I should continue to produce my own equipment or trade another resource with the company to use the equipment they produce.
The production possibilities frontier is a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology (Mankiw, 2021). A company or nation can examine the production of two goods side by side with another in order to determine the opportunity costs and comparative advantage for each good to determine whether or not a trade is efficient for them. Once determining who holds the comparative advantage for each good, it is important to determine the specialization, or maximum production for each good before trade. This allows companies or nations to move outside their PPF to determine what trade is efficient for business as our book illustrated with Frank and Ruby in regard to the production of meat and potatoes.
Mankiw, G. (2021). Principles of Economics. (9th ed.). Cengage.