ECN 104 Chapter Notes - Chapter 8: Autarky, Absolute Advantage, Comparative Advantage

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Goods and services purchased from abroad are imports; goods and services sold abroad are export. Globalization is the linkage of different countries through international trade. Absolute advantage- if one country produces product a and another country produces product b, both countries should specialize in what they can produce and trade. Comparative advantage- even if both countries can produce both goods, one country could have a comparative advantage in one of the products while another country has the. Ca in the other, and they can trade. A country has a comparative advantage if the opportunity cost of producing a product is lower in this country than others. The point of trade was to improve the standard of living of the people in the country. Trade would secure wider markets for home producers and cheaper consumption for home consumers. Autarky is a situation where a country cannot trade with another country.

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