Exploring Macroeconomics
8th Edition
ISBN: 9781544337722
Author: Robert L. Sexton
Publisher: SAGE Publications, Inc
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Question
Chapter 2, Problem 16P
To determine
The country with lower
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Is absolute advantage or comparative advantage more important for trade? Give an Example
Why is comparative advantage important in determining trade instead of absolute advantage?
Why is comparative advantage more important than absolute advantage in determining whether trade is beneficial?
Chapter 2 Solutions
Exploring Macroeconomics
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- I don't understand the second part of this homework. If Frankie and Johnny completely specialize according to comparative advantage, what will happen to the amount of eggs and milk? I have the opportunity cost calculated to understand who should do what in this case. But what will I do to that number?arrow_forwardHow is the theory of absolute advantage similar to that of comparative advantage? How is it different?arrow_forwardGive three examples of trade in servieces and explain how comparative advantage may play a role in them. Do you think there are other factors at work than comparative advantage?arrow_forward
- 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?arrow_forwardA) Which producer has the comparative advantage in producing puzzles? Geppetto or Lewis B) Which producer has the comparative advantage in producing puppets? C) If both producers decided to trade with each other to stock their toy stores, which of the following is a range of terms of trade that would benefit both Geppetto and Lewis (1 puppet = x puzzles)? Please explain to me how to solve those questions. Don't just give me the answers. Thank you so much!arrow_forward
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