The principle of comparative advantage does not provide answers to certain questions. One of those questions is Do specialization and trade benefit more than one party to a trade? Is it absolute advantage or comparative advantage that really matters? How are the gains from trade shared among the parties to a trade? Is it possible for specialization and trade to increase total output of traded goods?

The principle of comparative advantage does not provide answers to certain questions. One of those questions is Do specialization and trade benefit more than one party to a trade? Is it absolute advantage or comparative advantage that really matters? How are the gains from trade shared among the parties to a trade? Is it possible for specialization and trade to increase total output of traded goods?

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter18: Trading With Other Nations

Section: Chapter Questions

Problem 10AA

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Similar questions

Explain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?
During the summer you have made the decision to attend summer school, which prevents you from working at your usual summer job in which you normally earn $6,000 for the summer. Your tuition cost is $3,000 and books and supplies cost $1,300. In terms of dollars, what is the opportunity cost of attending summer school? Show your calculation. What is comparative advantage? Give an example. Why does it make sense for economies to specialize according to comparative advantage and trade? What is the production possibilities frontier? What economic concepts are represented in the production possibilities model?
What is the relationship between production costs and comparative advantage? Group of answer choices Comparative advantage considers, “How much am I giving up to produce this good in this country?” Comparative advantage identifies the good for which the producer’s absolute advantage is relatively smaller. Comparative advantage identifies where the producer’s absolute productivity disadvantage is relatively larger. Comparative advantage happens when the production costs for both trading partners are the same.
Which of the following is not true about the differences between comparative advantage and absolute advantages? While it is possible to achieve gains from trade if the country does not have a comparative advantage in the production of any goods, it is not possible to achieve gains from trade if the country does not have an absolute advantage in the production of any goods. Comparative advantage emphasizes the relative cost differences based on opportunity costs, while absolute advantage emphasizes absolute costs. In order to achieve gains from trade, specialization should be based on comparative advantage and not absolute advantage. In the two nation, two good model, we will always see that a country will have a comparative advantage in at least one good.
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