ECON 340 Exam 1 Study Session

ECON 340 Exam 1 Study Session - d Never Intersects ii...

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I. Ricardian Model 1. Questions A) Why trade? B) What should we trade? C) Who should we trade with? D) What are the terms of trade? 2. Assumptions: A) SINGLE Input - Labor 3. Model – Graphical Method A) Tools: i) PPF (possible combinations of goods we can create) a) Negative slope b) Linear c) Slope = Opportunity Cost ii) Indifference Curve – Utility at some given fixed trade off a) Convex b) Downward sloping c) Higher utility further from origin
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Unformatted text preview: d) Never Intersects ii) Analysis: Comparing happiness with and without trade-Comparing Autarky Equilibrium to Trade Equilibrium-Principle of Comparative Advantage *1 Q: Consumption Production-Conclusion: Why Trade? -Beneficial Who to trade with? -Country who we have CA with What to trade? -Good we have CA in What should terms of trade be? -(Px/Py) A < (Px/Py) tt < (Px/Py) B...
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