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Comparative advantage

Econ 5.04

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Corn Citrus Number of additional worker hours to produce one unit of citrus instead of one unit of corn United States 2 4 2 Developing Country B 8 10 2 Developed Country C 2 6 4 Apparel Computer Software Number of additional worker hours to produce one unit of computer software instead of apparel United States 2 4 2 Developing Country A 4 12 8 Developed Country D 2 4 2 Identify an example of absolute advantage relative to the United States from your data tables. Be sure to identify which country has absolute advantage (U.S. or other), the product, and data to support your claim. Tip: When considering absolute and comparative advantage, worker hours to produce one unit is a reflection of productivity.

Krugman AP Macro Economics Chapter 4

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?? Chapter 4: Comparative Advantage and Trade Trade: people divide tasks among themselves and each person provides a good or service that other people want in return for different goods and services wanted Gains from Trade: dividing tasks allows for more people to get more of what they want Specialization: When gains from trade are caused by division of tasks Adam Smith?s (1776) The Wealth of Nations: 18th century pin factory where each person specializes in the production of one thing Production Possibilities: curve model is particularly useful for illustrating gains from trade based on comparative advantage Most important insights in all of economics is that there are gains from trade even if one of the trading parties isn?t especially good at anything
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