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International Econ - 3.1 - Comparative Advantage

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cmarquardt94's version from 2016-09-20 23:02

Section

Question Answer
what does this mean? (aLC / aLW) < (aLC* / aLW*)this is saying that the [ratio of labor required to produce a pound of cheese to that required to produce a gallon of wine] is lower in HOME than it is in foreign (ie. Home's [relative productivity in cheese] is higher than it is in Wine)
The potential for gains from the rearrangement of production among countries is due to differing Opportunity Costs
What is specialization?the [division of productive activities] among among persons and regions so that no one individual or area is totally self-sufficient
When individuals seek to identify the activity she can perform [at a lower marginal opportunity cost] than someone else. This ability is the individuals....?comparative advantage!
What is the definition of Comparative Advantage?the ability to perform an activity at a lower marginal opportunity cost that others
Specialization based upon comparative advantage results in greater...?productivity
What is true about [specialization], given any set of resources?specialization will result in higher outout
What is the basis for Specialization ( or what determines it) ?differing Opportunity costs
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