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Lecture

International Trade

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Department
Economics
Course
ECO101H1
Professor
James Pesando
Semester
Winter

Description
Topic 22 J International Trade March 21 J 23 rd Outline: 1. The Gains from Trade: Individuals (Omit J see Micro) -- Example -- Consume outside PPF 2. The Gains from Trade: Nations -- Overall Gain -- Winners and Losers 3. (Weak) Arguments Against Trade 4. Tariffs; z The Gains from Trade: Individuals -- Omit; see Micro Notes; -- Two ways of expressing PPF: 1. Production Possibilities (Per Week) Cloth Corn John 15 3 Jane 32 16 Resources Required to Produce One Unit of: Cloth Corn John 115 13 Jane 132 116 (These two are the same) Opportunity Cost of Producing One unit of : Cloth Corn John 0.2 corn 5 cloth Jane 0.5 corn 2 cloth z The Gains from Trade: Nations Overall Gain: With trade, a country can consume outside its PPF by specializing in the production of goods in which it has a comparative advantage. Q: How can you tell if a country has comparative advantage in the production of good? A: Look at which goods the country is importing and exporting Domestic price < world price country has a comparative advantage and will export good; Domestic price > world price country does not have a comparative advantage and will import good; (Remember: in perfect competition, prices reflect costs of production (P=ATC) ) www.notesolution.com
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