ECON 1116 Chapter Notes - Chapter 3: Absolute Advantage, Comparative Advantage, Opportunity Cost

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Chapter 3 interdependence and gains from trade: trade, people have certain abilities to make certain goods and services b. Another person: one potato in one hour has absolute advantage: another perspective: producing more with the same amount of resources d. i. One person: four potato in one hour d. ii. Opportunity cost is calculated by taking the total values a. iii. Goods made within the same time period a. iv. opportunity cost for meat a. iv. 1. 8 meat: 32 potatoes 1 meat: 4 potatoes a. v. Rose has comparative advantage at making meat frank automatically has comparative advantage at making potatoes a. vi. Frank should use all his resources in making potatoes: rose b. i. meat (24) in eight hours or potatoes (48) in eight hours b. ii. has absolute advantage in the production of meat and potatoes b. ii. 1. b. ii. 2. Same amount of resources makes more within the same time b. iii. 24 meat: 48 potatoes 1 meat: 2 potatoes b. iv.

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