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while it has comparative advantage only in one good.

2007-01-24 13:26:00 · 2 answers · asked by cool dude 1 in Social Science Economics

2 answers

It is the comparative advantages that matter not the absolute advantages. And think in terms of opportunity cost.

2007-01-24 16:19:45 · answer #1 · answered by YSM 1 · 0 0

this occurs in the ricardian model because both countries benefit from specialization in the production of a specific good. it may seem like the country with absolute advantage in both goods would be made worse-off by importing goods, but according to economic theory, it benefits from getting a higher price for the good it has a comparative advantage in (and therefore exports) and a lower price for the good where the other country has a comparative advantage

2007-01-24 21:57:15 · answer #2 · answered by Jeff G 2 · 0 0

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