Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 9.1, Problem 5Q
To determine

Effects of law of one price in the transferable comparative advantages.

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What is Comparative Advantage and how is it determined? Explain this concept in words.
The 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?
What 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.
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