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ECON 208 - Notes, week of Nov 17

3 Pages

Economics (Arts)
Course Code
ECON 208
Lee Ohanian

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Adrienne Pacini ECON 208 WEEK November 17 2009 THE GAINS FROM INTERNATIONAL TRADE Chapter 33The Gains from TradeOpen economy an economy that engages in international tradeClosed economy an economy that has no foreign trade Interpersonal Interregional and International TradeWithout trade people must be selfsufficientWith trade people can specialize efficiently and satisfy other needs by tradingThis basic principle is true for individuals regions and countriesIllustrating the Gains from TradeGains from trade the increased output due to the specialization according to comparative advantage that is made possible by trade Absolute advantage the situation that exists when one country can produce some commodity at lower absolute cost than another countryo There can be gains from trade for both countries despite one having absolute advantage in production of both goodsComparative advantage the situation that exists when a country can produce a good with less forgone output of other goods than another country o Based
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