Unformatted text preview: (trade with specialization), it must be true that the original points (autarky) were not optimal, and it was in fact possible to make some people better off without making others worse off, so that the new solution does indeed represent a welfare improvement from the world ’ s perspective. 7. The statement in the question seems to be guided by the notion of absolute disadvantage . The Ricardian model of comparative advantage argues that the production of each good 9as long as there is more than one) embodies an opportunity cost in terms of other goods that could be produced. The basic idea is that every country must have a comparative advantage in some product (assuming there are more products than countries), which eventually creates incentives for international trade. Protectionist policies that promote autarky render it impossible for a country to exploit its comparative advantage....
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This note was uploaded on 10/26/2011 for the course ECONOMICS 360 taught by Professor Nicholassly during the Spring '11 term at Oregon.
- Spring '11