Textbook Notes (368,558)
United States (206,080)
Economics (994)
Chapter 3

Chapter 3 - Interdependence and the Gains from Trade

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Department
Economics
Course
Economics 10a
Professor
Gregory Mankiw
Semester
Fall

Description
Chapter 3: Interdependence and the Gains from Trade  ­ without trade, production possibilities frontier = consumption possibilities frontier ­ trade allows specialization and more production/consumption Comparative Advantage: The Driving Force of Specialization ­ absolute advantage: ability to produce a good using fewer inputs than another  producer ­ opportunity cost measures trade­off between goods for each producer ­ opportunity cost: value of the best option foregone (second best option not all  other options put together)  ­ comparative advantage: having a lower opportun
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