Chapter

Comparative Advantage and Gains from Trade

John P. Burkett

in Microeconomics

Published in print April 2006 | ISBN: 9780195189629
Published online October 2011 | e-ISBN: 9780199850778 | DOI: https://dx.doi.org/10.1093/acprof:oso/9780195189629.003.0007
Comparative Advantage and Gains from Trade

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This chapter discusses the microeconomic concepts of gains from trade and comparative advantage. It explains that gains from trade are particularly large when producers specialize in the goods in which they have a comparative advantage because they can produce at lower opportunity costs than others. The maximum feasible output of one good consistent with producing a specified quantity of another good is referred to as production possibilities frontier (PPF). Several relevant computational exercises and their solutions are provided.

Keywords: comparative advantage; gains; from trade; opportunity cost; output; production possibilities frontier; microeconomics

Chapter.  5973 words.  Illustrated.

Subjects: Microeconomics

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