ECO 2013H Study Guide - Comprehensive Midterm Guide: Absolute Advantage, Comparative Advantage, Opportunity Cost
Document Summary
This is one of the most basic economic questions. a. ii. The highest level of resources is the logic of international trade and the specialization of production between countries. a. iii. The made in label for a shirt only tells part of the story as the material could have been grown in a different country. a. iv. The products and services most of us take for granted come to us through an incredibly complex global network of farms, mines, factories, traders, and stores. a. v. The invisible hand is a coordination mechanism that was first suggested by the eighteenth-century economic thinker adam smith. a. vi. Countries and firms specialize in making goods for which they have had the lowest opportunity cost, and they trade with one another to get the combination of goods they want to consume. The resulting gains from trade can be split up so that everyone ends up better off: production possibilities b. i.
