ADM 3318 Lecture Notes - Lecture 5: Comparative Advantage, Mercantilism, Leontief Paradox

• School: University of Ottawa
• Department: Administration
• Course: ADM 3318
• Professor: Tyler Chamberlin

Document Summary

> relative (not absolute) advantage in one economic activity that one nation enjoys in comparison with other nations: opportunity cost. > given the alternatives, the cost of pursuing one activity at the expense of another activity. > mercantilism weakens a country in the long run and enriches only a few segments. > a country should specialize in and export products for which it has absolute advantage; import others. > a country has absolute advantage when it is more productive than another country in producing a particular product. > country should specialize in the production of those goods in which it is relatively. C" more productive even if it has absolute advantage in all goods it produces. > absolute advantage is really a special case of comparative advantage. > the pattern of international trade depends on differences in factor endowments not on differences in productivity.