11:373:101 Lecture Notes - Lecture 5: Autarky, Absolute Advantage, European Cooperation In Science And Technology

• School: Rutgers University
• Department: Environmental and Business Economics
• Course: 11:373:101
• Professor: P Gottlieb

Document Summary

Topic 5 specialization and gains from trade. People, places, or firms can all specialize. Specialization and exchange can increase economic well-being. People have different preferences about what they want to do. Specialization can lead to boredom and routineness but omg suck it up. Efficiency in large-scale production (cid:1445)economies of scale(cid:1446) Assume that each country wants to consume exactly 10 tv sets and 1 hour of consultant services. Option 1: autarky(cid:1446) each country makes everything that it consumes. Usa produces consulting services for both countries. China produces consulting services for both countries. Countries specializing in what they are good at saves much more money! Countries specializing in what they are bad at. These countries specialized in their absolute advantages. Not always the best should look at comparative advantage to determine best specialization. If china had lower resource costs for both products . They should specialize in the product with lower opportunity cost tvs.