ch33a0-2 - Chapter 33 The gains from trade Gains from trade...

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Chapter 33 – The gains from trade Gains from trade arise if… Opportunity costs differ between countries . ( Theory of comparative advantage ) Why? Trade allows importing countries to acquire goods at a lower opportunity costs than if they produced the goods themselves. Sources of comparative advantage : Different factor Example 1 : Should Michael Jordan mow his lawn or can he gain from trade with the kid next door? Time to mow lawn Opportunity costs Michael Jordan 2 hours Kid next door 4 hours Example 2 : Should Canada produce its own textiles or can it gain from trade with China? Workers required to produce a yard of textiles Opportunity costs Canada 2 workers China 4 workers EC120 Chapter 33 – The gains from international trade 1 of 4
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Absolute and comparative advantage A has an absolute advantage in X if… …A is more productive at producing X than B. A has an
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This note was uploaded on 11/17/2008 for the course EC 120 taught by Professor Zeiss during the Spring '08 term at Wilfred Laurier University .

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ch33a0-2 - Chapter 33 The gains from trade Gains from trade...

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