Principles of Microeconomics (Second Edition)
2nd Edition
ISBN: 9780393623840
Author: Lee Coppock, Dirk Mateer
Publisher: W. W. Norton & Company
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Chapter 2, Problem 7QR
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Is absolute advantage or comparative advantage more important for trade? Give an Example
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Principles of Microeconomics (Second Edition)
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- What is the difference between absolute advantage and comparative advantage and If two parties trade based on comparative advantage and both gain, in what range must the price implicit in the trade lie?arrow_forwardThe principle of comparative advantage does not provide answers to certain questions. One of those questions is Do specialization and trade benefit more than one party to a trade? Is it absolute advantage or comparative advantage that really matters? How are the gains from trade shared among the parties to a trade? Is it possible for specialization and trade to increase total output of traded goods?arrow_forwardExplain the difference between absolute advantage and comparative advantage. Which is more important in determining trade patterns, absolute advantage or comparative advantage? Why?arrow_forward
- What is the difference between absolute advantage and comparative advantage in decisions to trade with another country?arrow_forwardGive three examples of trade in servieces and explain how comparative advantage may play a role in them. Do you think there are other factors at work than comparative advantage?arrow_forwardWhat is free trade and what are the benefits of free trade as suggested by the principle of comparative advantage?arrow_forward
- Is the following statement true or false? Please explain. "Everyone has a comparative advantage."arrow_forwardWhen countries specialize based on their comparative advantage and trade with each other, how does it lead to gains from trade for both countries (even if one country has an absolute advantage in both goods)?arrow_forwardWhat is the relationship between production costs and comparative advantage? Group of answer choices Comparative advantage considers, “How much am I giving up to produce this good in this country?” Comparative advantage identifies the good for which the producer’s absolute advantage is relatively smaller. Comparative advantage identifies where the producer’s absolute productivity disadvantage is relatively larger. Comparative advantage happens when the production costs for both trading partners are the same.arrow_forward
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