ECON 160 Lecture Notes - Lecture 25: Comparative Advantage, Opportunity Cost, Zygosity
Document Summary
This country does not have a comparative advantage in this good. Homogenous good with many buyers and many sellers because demand and supply diagram. It is a small country which cannot afford the world price. This is a homogenous good with many buyers and sellers. Domestic consumer favor trade because price has fallen. Workers in the imported goods industry with industry specific skills. Country has a comparative advantage in the good. When firms are embedded on supply curve the show opportunity cost of that firm which is private knowledge to the firm. World market upward slope supply, downward slope demand. Supply curve is an upward slope because firms are able to make profit as price increases because opportunity cost increases. If we have free trade we will never see q0, only see world. Big countries are very small in world market. Wdemand is low cost producer (produce good at lower cost than other countries.