Ch. 3 Gains from Trade

Ch. 3 Gains from Trade - Interdependence and the Gains from...

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Interdependence and the Gains from Trade Chapter 3
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Markets people trade with each other. Why do people trade with each other? Why not produce what you want to consume for yourself? Why do people in different countries trade with each other? Why don’t we limit consumption in the US to what we produce in the US?
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Country I (100 identical workers) Output Per Worker Food 20 Autos 5
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Country I Auto Workers Auto Production Food Workers Food Production 0 0 100 2,000
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Country I Auto Workers Auto Production Food Workers Food Production 0 0 100 2,000 100 500 0 0
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Country I Auto Workers Auto Production Food Workers Food Production 0 0 100 2,000 100 500 0 0 50 250 50 1,000
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Country I Auto Workers Auto Production Food Workers Food Production 0 0 100 2,000 100 500 0 0 50 250 50 1,000 25 125 75 1,500
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production possibilities frontier (PPF) is a graph that shows the combinations of output that the economy can produce given the available factors of production and the available production technology. Sort of like a budget constraint covered in Ch. 21
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This note was uploaded on 12/30/2011 for the course ECON Econ 200 taught by Professor Clement during the Fall '11 term at Maryland.

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Ch. 3 Gains from Trade - Interdependence and the Gains from...

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