COMPRATIVE_ADVANTAGE_Gain_Calculation_Poppy - 1 R x[3 D R 2...

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COMPRATIVE ADVANTAGE [CA]: CALCULATING THE GAINS TO TRADE Select an exchange rate within the range, e.g. 1 R = 1 P A. Fixed-consumption approach For each country select that product where the country does not have CA And ask which method will take less time of production leaving leisure Myanmar Cuba Make at home Make at home 1 R 1 P 1 P 1 R Convert to a common denominator, e.g. time to produce [lower time is better] 1 R x [2 D / R] 1 P x [1 D / P] 1 P x [4 D / P]
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Unformatted text preview: 1 R x [3 D / R] 2 Days > 1 Day 4 Days > 3 Days 1 day freed up by specializing and trading to achieve desired consumption B. Fixed production method Select the CA product for each country and ask which way will get more of the other product Myanmar Cuba Make Trade Make Trade 1 P 1 P x [1/2 R / P] 1 R 1 R 1 R x [3/4 P / R] 1 P ½ R < 1 R ¾ P < 1 P Benefit of trade (conceptually similar to a surplus) 1 day, 1P or ½ R 1 day, ¼ P or 1/3 R...
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