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Microsoft PowerPoint - lecture 2-experiment, trade

Microsoft PowerPoint - lecture 2-experiment, trade -...

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1 Econ 221 Production and Exchange Experiment Comparative Advantage (From Elements of Political Economy James Mill, 1821) • Poland – Corn 100 days of labour – Cloth 100 days • England – Corn 200 days – Cloth 150 days Sample Problem 3 per Labor 5 per Labor US 2 per Labor 2 per Labor Canada Wheat Steel Discussion • Outsourcing? – Schumer and Roberts – “Exporting jobs is not free trade” Trade with poor nations? Sample problem: Guns and Butter Region W: – 10 units of labor – 1 Gun per unit of labor, 5 Butter per unit Region M: – 10 units of labor – 2 Guns per unit of labor, 2 Butter per unit Analysis Draw the joint PPF Comp Adv? Absolute Adv?
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2 Sample problem: Guns and Butter Region W: – 10 units of labor – 1 Gun per unit of labor, 5 Butter per unit Region M: – 10 units of labor – 3 Guns per unit of labor, 2 Butter per unit Region A: – 10 units of labor – 2 Guns per unit of labor, 1 Butter per unit Analysis Who has the comparative advantage in Guns?
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