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Unformatted text preview: 8. Start with new graphs and redo point 4 and 5 above for the case when T c =1 Bread/cake. Explain what happens in this case. 9. Start with new graphs and redo point 4 and 5 above for the case when T c =5 Bread/cake. Explain what happens in this case. Principle of Comparative Advantage Trade benefits both parts because it allows people to specialize in activities in which they have a comparative advantage. Opportunity Cost Cakes Bread A B/C C/B B B/C C/B 3 A B Cake Bread Cake Bread Without Trade: Production & Consumption W Trade: Production Trade Consumption: Gains from Trade Imports= goods produced abroad and consumed domestically. Exports = goods produced domestically and consumed abroad. More details in Chapter 9. International trade makes the country as a whole better off, while it can make same individuals worse off....
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