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Unformatted text preview: Comparative Advantage David Ricardo Theory of why countries trade: Countries should produce and export those goods in which you are relatively more productive Flags Water US 60 f/d 60 u/d France 10 f/d 30 u/d Comparative advantage US= 6 times US= 2 times Measuring Imports Diagram- shows the US domestic Market for water before international trade _________________World Trade Consumer and producer surplus P= $1 _____________________ P= $.60 40 100 160 Q CS= +$A + $B PS= -$A TS +$B 20:19...
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This note was uploaded on 01/18/2012 for the course ECON 201 taught by Professor C.liedholm during the Summer '07 term at Michigan State University.
- Summer '07