Suppose X produces only X and cars. The resources that are used in the production of these two goods are not specialized—that is...
2. Comparative and absolute advantage
X and Z are farmers. Each one owns a 20-acre plot of land. The following table shows the amount of A and B each farmer can produce per year on a given..
3. Gains from trade
Consider two neighboring island countries called x. They each have 4 million labor hours available per month that they can use to produce corn, jean..
4. Specialization and trade
When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its..
5. Terms of trade
Suppose that X and Y both produce oil and cheese. X's opportunity cost of producing a pound of cheese is L barrels of oil while Y's oppor..
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