Comparative Adv:Gains from Trade

Comparative - atanything

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Comparative Advantage and Gains from Trade Gains from trade - the mutual gains that individuals can achieve by specializing in  doing different things and trading with one another There are gains from trade even if one of the trading parties isn’t especially good  at anything An individual has a  comparative advantage  in producing a good or service if the  opportunity cost of producing the good or service is lower for that individual than  for other people Two people will be willing to engage in a trade only if the “price” of the good each  person is obtaining from the trade is less than his own opportunity cost of  producing the good himself As long as people have different opportunity costs, everyone has a comparative  advantage in something, and everyone has a comparative disadvantage in  something An individual has an  absolute advantage  in an activity if he or she can do it 
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This note was uploaded on 03/16/2012 for the course ECON 101 taught by Professor Hansen during the Fall '07 term at Wisconsin.

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Comparative - atanything

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