EC120 Chapter Notes - Chapter 9: Deadweight Loss, Demand Curve, Comparative Advantage
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EC120 Full Course Notes
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World price: the price of a good that prevails in the world market for that good. If the world price is higher than the domestic price the nation should export because sellers will want the higher prices available abroad, nation has comparative advantage in the production of the good. If the world price is lower than the domestic price the nation should import because foreign sellers ofer a better price, foreign countries have comparative advantage in the production of the good. Closed economy no trade happening in the economy! Comparing the world price and the domestic price indicates whether a nation has a comparative advantage in the production of that good! The gains and losses of an exporting country. 1. when a country allows trade and becomes an exporter of a good, domestic producers of the good are better of and domestic consumers of the good are worse of.