Microeconomics
Microeconomics
10th Edition
ISBN: 9781259655500
Author: David C Colander
Publisher: McGraw-Hill Education
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Chapter 9, Problem 1QE
To determine

The effect of comparative advantage of a country in their trade.

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Explanation of Solution

If a country has no absolute advantage on trade, it can go with the comparatively advantaged goods. In this case, the trade is based on the law opportunity cost. If a country has low opportunity cost in the production of any good, it can export the product with a low opportunity cost and import the product with the high opportunity cost. Thus, it is better to export the good with high comparative advantage and import the good with low comparative advantage.

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