Lecture 3 - 1. Vocabulary a. Autarky: No t rade (no...

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1. Vocabulary a. Autarky: No trade (no specialization) i. Do everything by yourself ii. Self Sufficient iii. Living out in the wild by yourself iv. Think of the range of stuff that one does to make money, it is so small to the range of goods that person consumes v. Where should we draw the line with whom we trade? 1. Inside of Ithaca? 2. Inside of New York? 3. Inside of America? 4. Inside of North America? a. Why do we trade with people in Arizona and not in Northern Mexico b. Marginal Cost: The cost to produce one additional unit of good i. If I want one more car, how much does it cost? c. Opportunity Cost: in the example today, it is the same as marginal cost i. What’s the cost for one more car? ii. The lowest marginal cost/ opportunity cause gives one an advantage d. Comparative Advantage: The person, firm, or country that has the lowest marginal cost of producing a good is said to have comparative advantage in that good e. Absolute Advantage: the country that can produce the MOST of goods is said to have the comparative advantage
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2. Simple Trade
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Lecture 3 - 1. Vocabulary a. Autarky: No t rade (no...

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