ECO 101 Chapter Notes - Chapter 21: Trade Adjustment Assistance, Absolute Advantage, Comparative Advantage
Document Summary
Specialization means that a country devotes its energies and resources to only a small proportion of the world"s productive activities. Mutual gains from trade: trade is a win-win situation, voluntary exchange. The many currencies involved in international trade. Impediments to mobility of labor and capital. Absolute advantage- over another in the production of a particular good if it can produce that good using smaller quantities of resources than can the other country. Comparative advantage-over another in the production of a particular good relative to other goods if it produces that good less inefficiently as compared with the other country. Gains from international trade still exist even if one country is more efficient than the other in producing everything. When every country does what it can do best, all countries can benefit because more of every commodity can be produced without increasing the amounts of labor and other resources used.