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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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BuyFindarrow_forward

Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

If country A is better than country B at producing all goods, will country A still be made better off by specializing and trading? Explain your answer. (Hint: Look at Exhibit 1.)

To determine

The difference between absolute advantage and comparative advantage.

Explanation

Yes, the country with an absolute advantage in the production of both commodities also has a comparative in the production of one commodity. The comparative advantage theory states that a country would specialize in the production and export of those goods in which it has a comparative advantage, in terms of cost, than the other country...

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