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Chapter 20: Q. 9 (page 493)
Under what conditions does comparative advantage lead to gains from trade?
Comparative advantage leads to gains from trade when the country specializes in the product which it has a more comparative advantage.
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What is intra-industry trade?
Look at Table 20.9. Is there a range of trades for
which there will be no gains?
How can there be any economic gains for a country from both importing and exporting the same good, like cars?
Brazil can produce pounds of beef or autos. In contrast, the United States can produce pounds of beef or autos. Which country has the absolute advantage in beef? Which country has the absolute advantage in producing autos? What is the opportunity cost of producing one pound of beef in Brazil? What is the opportunity cost of producing one pound of beef in the United States?
Why might a low-income country put up barriers
to trade, such as tariffs on imports?
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