Explain the concepts of Absolute Advantage and Comparative Advantage

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1.Explain the concepts of Absolute Advantage and Comparative Advantage. Provide 2 examples of comparative advantage in use in real-life.

2.Give the information below identify which country has an absolute advantage and comparative advantage. Which country should produce which products. What are the gains from trade for the world economy? (hint you will need to find autarky output) To receive credit all work must be shown.

	Brazil	Chile	Thailand	Panama
Beef	100 cows	70 cows	25 cows	50 cows
Lumber	1000 board feet	950 board feet	500 board feet	600 board feet

3.Explain the Factor Endowment Model (FEM). Provide 2 examples of FEM in use in real-life.

4.Compare Comparative Advantage to FEM

5.What is the Leontief Paradox? Provide 4 examples of the paradox in real-life

6.Explain why intra-industry is an important aspect of studying international trade

7.Is globalization a positive or negative development in the world? Explain your reasoning

Solution preview

Absolute advantage can be described as the ability of a country to produce a good or a service more efficiently when compared to the other countries. The ability to produce a good or service more efficiently can be measured in terms of a low marginal cost. If the country has the absolute advantage……………………….

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