GMS 724 Study Guide - Midterm Guide: Comparative Advantage, Statics, High Tech
11 Nov 2018
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Division of gains: although specialization brings potential economic benefits to all trading countries, the earlier discussion did not indicate how countries will divide increase output. In the case of our wheat and coffee example, if both the united states and. Costa rica receive some share of the higher output, both will be better off economically through specialization and trade: however, many people are concerned with relative as well as absolute economic growth. If they perceive that a trading partner is gaining too large a share of benefits, they may prefer to forgo absolute gains for themselves so as to prevent others from gaining a relative economic advantage. It costs more to transport the goods than is saved through specialization, the advantages of trade are negated. Costa rica or the united states could change because of advancements in and acceptance of genetically modified crops. Production networks: both theories deal with trading one product for another.
