Is it true that a country needs to have an absolute advantage in the production of a good in order to benefit from trade in that good? Explain
What will be an ideal response?
Countries that do not have an absolute advantage in the production of a good can also benefit from trade. Even if a country cannot produce more of a good compared to other countries, it can still gain from the trade of that good as long as it has a comparative advantage in production. Comparative advantage is the ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than other competing producers. So long as opportunity costs are not the same across countries, one country will always have a comparative advantage in producing some goods and the other country other goods.
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Using the above figure, if the government levies a new unit tax in this market, S represents the original supply curve, and St represents the after-tax supply curve, then the revenues that the government collects from imposing this tax is represented
on this graph by A) OAEG. B) OBCG. C) BAEC. D) CEF.
Henry deposits $2,000 in currency in the First Street Bank. Later that same day Jane Harris negotiates a loan for $5,400 at the same bank. After these transactions, the supply of money has:
A. Increased by $2,100 B. Increased by $3,300 C. Increased by $5,400 D. Decreased by $3,300