Ch 5 Global Trade [AP & Reg]

Pays lower 80 beforetradespecialization

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Unformatted text preview: offees 5 1/5 __ Bread=1 Coffee “Trade is the fre e lunc h o f e c o no mic s .” 1. (Haiti/Cuba) has an absolute advantage in coffee and (Haiti/Cuba) has an absolute advantage in bread. 2. Haiti will export (bread/coffee) [comparative advantage] & import (bread/coffee). [comparative disadvantage] & Cuba will export (bread/coffee) & import (bread/coffee). 3. Advantageous trade can occur between Haiti & Cuba when 1 bread is exchanged for (3/5/7) tons of coffee. Production in both reflects (increasing/constant) opportunity costs. “Export” what it can produce at a lower relative price and “import” goods it can buy at a lower relative price. produce lower buy lower Abs o lute Advantag e - more efficient, can produce more with the same number of inputs [who can produce absolutely more] “Do what you do best & trade for the rest.” With comparative advantage, a nation receives a comparative higher relative price for the goods it exports , higher and pays a lower relative price for the...
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