01:220:102 Lecture Notes - Lecture 14: Comparative Advantage, Marginal Cost, Demand Curve

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Barbara Crockett

Document Summary

Ppc & production possibilities frontier = same. Ppc: on the curve = ef cient: points b & d are both ef cient, but you choose one or the other based on personal preference. If we can make parties better off w/o hurting anyone else, then why aren"t we doing it? (aka point a, where resources are being left on the table) Specialization curve: point t= point at which you specialize in what you do relatively best. Terms of trade lie between both parties" opportunity costs. We will always gain from trade if ppl specialize in what they do best (comparative advantage: bene t in short run: we can get more stuff, bene t in long run: we get better at what we specialize in. Economy-wide ppc: not giving up much at rst b/c we use best resources rst. Externalities: there are costs associated with supply/consumption of product that are not included in supply/demand curves.