S has comparative advantage in computers coffee mcus

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Unformatted text preview: rs → So Brazil has comparative advantage in coffee Prof. David Lee AEM/ECON 2300 11 of Lecture 3 GAINS FROM TRADE WITH CONSTANT MARGINAL COSTS Each country produces and consumes: Computers Allow specialization and trade: Prof. David Lee 20 10 15 20 U.S. 40 0 Brazil Allow specialization: U.S. Brazil Autarky: Coffee 0 40 U.S. Brazil AEM/ECON 2300 12 of Lecture 3 SPECIALIZATION AND TRADE U.S. Brazil Computers 40 Computers X 40 30 25 20 30 A* A 20 TOT (1:1) 10 Prof. David Lee 15 20 PPFBR B* 15 B 10 PPFUS 10 TOT (1:1) Y 30 40 Coffee AEM/ECON 2300 10 20 25 30 13 of 40 Coffee Lecture 3 GAINS FROM TRADE WITH CONSTANT MARGINAL COSTS Each country produces and consumes: Computers “Gains from trade”: Increases in total global production & consumption: Prof. David Lee 10 15 20 U.S. 40 0 0 40 U.S. 25 15 (imports) Brazil Specialization and trade: 20 Brazil Specialization: U.S. Brazil Autarky: C...
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