MGEA02H3 Chapter : Week 12 study guide

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA02H3
• Professor: Gordon Cleveland

Document Summary

Chapter 33 the gains from international trade notes open economy an economy that engages in international trade closed economy an economy that has no foreign trade. N without trade, everyone must be self-sufficient; with trade, people specialize in what they do well, satisfy other needs by trading. N world output increases if countries specialize in the production of the goods in which they have a comparative advantage. In industries with significant scale economies, small countries that do not trade will have low levels of output and therefore high costs. With international trade, however, small countries can produce for the large global market and thus produce at lower costs. N according to the heckscher-ohlin theory, countries have comparative advantages in the production of goods that use intensively the factors of production with which they are abundantly endowed climate affects comparative advantage.