Macroeconomics
Macroeconomics
5th Edition
ISBN: 9781319098759
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Chapter 5, Problem 11P
To determine

This answer covers the theory of comparative advantage and how it’s applied in trade

Concept Introduction:

Opportunity Cost: It is the next best option available to a person. Opportunity cost refers to the benefits which are given up in the process of obtaining some other benefits.

Comparative Advantage: In a trade, a country has comparative advantages in producing goods when the opportunity cost of producing that good is less in comparative to the nation with which it is trading with.

Export: It is the amount of good which is demanded by the people of a foreign country and supplied by the domestic country.

Import: It is the amount of good which is demanded by the people domestic country and supplied by a foreign country.

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