11The Ricardian Model, Part 3• Agenda– Misconceptions about Comparative Advantage– Comparative Advantage with Many Goods– Transportation Costs and Non-Traded Goods– Empirical Evidence2Misconceptions•The Productivity/Competitiveness Argument– Free trade is beneficial only if a country is more productive than foreign countries.3Misconceptions•The Productivity / Competitiveness Argument– The benefits of free trade do not depend on absolute advantage. – The benefits of free trade depend on comparative advantage. 4Misconceptions•The Pauper Labor Augment– Free trade with countries that base competition on low wages is unfair and hurts other countries that pay high wages.
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