Micro 3 - cost of the other-trade can benefit everyone in...

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Chapter 3 -Absolute advantage: the ability to produce a good using fewer inputs than the producer -Opportunity cost: whatever must be given up to obtain some item -Comparative Advantage: the ability to produce a good at a lower opportunity cost than another producer -a person can have an absolute advantage in two/both goods -It’s impossible, however, to have a comparative advantage in both goods -the opportunity cost of one good is the inverse of the opportunity
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Unformatted text preview: cost of the other.-trade can benefit everyone in society because it allows people to specialize in activites in which they have a comparative advantage The Price of Trade-for both parties to gain from trade, the price at which they trade must lie between the two opportunity costs. Should the US trade with other countries-imports: goods produced abroad and sold domestically-exports: goods produced domestically and sold abroad...
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