POLI 243 Chapter Notes - Chapter 7: Leontief Paradox, Protectionism, Hegemonic Stability Theory
13 May 2013
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Comparative advantage: free trade is mutually beneficial ; actor"s ability to produce a good or service more efficiently than another actor"s. It can shift all resources to producing a good it"s good at producing, if everyone does the same more of each good gets produced at lower cost and more goods to go around, overall consumption increases and everyone benefits. Specialization and division of labour are used. Autarky: country with closed borders who are restricted only to items within their border. Ppf production possibility frontier limit on how much it can produce. Specialization: leads to result in maximum production possible out of nay combination of production mixes. Comparative advantage: when one country can produce an item at a lower cost in terms of opportunities forgone than can the other country. Absolute advantage: when country can use fewer resources to produce a product than the other country.
