MacroEconomics
Australia has a lower opportunity cost of producing surfboards relative to New Zealand
Assume that Australia has a comparative advantage in producing surfboards and New Zealand imports surfboards from Australia. We can conclude that
Some individuals in both countries may be made worse off because of trade
Textbook examples of trade between two nations are simplified in order to show how two nations both benefit from trade. These examples are misleading because
Comparative advantage
The ability of one person or nation to produce a good at a lower opportunity cost than the other
absolute advantage
The ability to produce more of a good or service than competitors when using the same amount of resources
opportunity cost
To explore the rationale for specialization, economists use the
Raise; lowering
According to the theory of comparative advantage, _______________trade and specialization productivity by _____________ opportunity costs
make everyone better off
Specialization and trade exploit differences in productivity across workers and