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class 3 jan 24 - Class 3 Only focusing on inter-industry...

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Class 3 Jan 24, 2007 Only focusing on inter-industry trade today. Differences in terms of land, climate, capital, labor, and technology. Heckscher-Ohlin model says that difference in resources cause productive differences, leading to gains from trade- not empirical, doesn't fit Ricardian model is based on technological differences across countries differences are reflected in the productivity of labor US demand- estimated around 10 million roses. Winter roses problem Opportunity cost- make a choice, limited resources (such as time and money) pick something-> you lose something. Opp cost is what you give up in the next best thing. Assumptions- 2 countries, 2 goods implicit cost- using the same resources, you could have produced something else. Opp cost is implicit cost + explicit cost If the US produces 100,000 computers, it has given up the resources to produce 10,000,000 roses Mexico can produce 30,000 computer computers with the same resources used to produce 10,000,000 roses.
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