ECN 104 Lecture Notes - Lecture 2: Absolute Advantage, Opportunity Cost, Comparative Advantage

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amaranthgnu139

9 Dec 2015

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Every day you rely on many people from around the world, most of whom you do not know, to provide you with the goods and services that you enjoy. People provide you and other consumers with these goods and services because they get something in return. Keep in mind one of the key principles from ch1/ trade can make anyone better of. Gains from trade are more obvious if people specialize. This can be due to niche or access and quality of resources (coffee grown in brazil, technology made in japan) Overall each can benefit by specializing in what he or she does best and trading it with the other. At certain times when one is better at producing multiple goods there will be no benefits to trade. Productions possibility frontier shows the various mixes of output that an economy can produce with its available resources. This goes back to one of our principles in ch1 (people face trade-ofs)

Related Questions

The law of comparative advantage states that:

a. each country should specialize in producing the good with the lowest opportunity cost.

b. a country that is able to produce something using fewer resources than other countries would gain from specialization and trade.

c. international trade barriers slow the introduction of new goods and better technologies.

d. countries can gain from trade if production is subject to economies of scale.

e. countries must agree on how much of one good exchanges for another.

turquoiseferret638

(1) Implicit costs are the opportunity costs of using the resources of ---------------------------------------------

a. outsiders.

b. banks.

c. retained earnings.

d. owners.

(2) The Principle of Comparative Advantage implies that:

a. Two countries can benefit from trade only if one country is better at producing a good compared to another in absolute terms.

b. Two countries can benefit from specialization and trade even if one country is better at one good compared to another in absolute terms.

c. all countries should specialize in whatever they have a higher opportunity cost to producing.

d. all countries are better off when each produces all goods for themselves and they do not trade with each other.

(3) Points inside a production possibilities frontier represent

a. unemployment of resources

b. unattainable production combinations

c. efficient use of resources

d. supply exceeds demand

(4) In a free market --------------------------------

a. governments intervene

b. governments plan production

c. governments interfere

d. prices adjust to reconcile scarcity and desires

crimsonmarten898

I need help with this!!!

International trade can improve efficiency in the use of global resources to make all parties better off. If no one can deny the power of comparative advantage and gains from trade, then why do we continue to resist? Trade happens because we want to sell goods to people in other countries, and we want to buy stuff that is produced in other countries. With individual decision makers acting in self-interest, do you think anyone is watching out for the global economy?

http://www.bbc.co.uk/news/business-29572475 (Links to an external site.)

ECN 104 Lecture Notes - Lecture 2: Absolute Advantage, Opportunity Cost, Comparative Advantage

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