Questions tagged [comparative-advantage]

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Why does anyone prepare their own food?

I'm not an econ person, so this is a super naive question, but here goes: why, given the comparative advantage that specialization produces, does anyone prepare their own food rather than buying from ...
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Does trade between countries tend towards a state of only containing monopolies as a result of comparative advantage?

I've recently been reading Mankiw's Microeconomics 8th edition. In there he raises the idea of comparative advantage and points out how if we have two participants in an economy who both produce ...
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Price convergence in international markets?

Why do prices tend to converge towards the pre-trade prices of the larger country when two countries trade based on comparative advantage?
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Does comparative advantage maximize revenue?

I am reading Lovell's "Economics with calculus", where in Chapter 2, he presents Ricardo's Theory of Comparative Advantage, and states how in a simple model two countries benefit from free ...
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1answer
50 views

What is technology in the Ricardo model?

I've been reading about the Ricardo and Heckscher-Ohlin models. I'm having trouble following what makes a worker in the former able to produce more or less of a given good. So e.g. suppose a US worker ...
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Which countries have the comparative advantage in Ricardo's example?

I am a complete beginner here trying to learn through Khan Academy. I found some data that correspond to Ricardo's explanation of comparative advantage. According to Wikipedia "England has a ...
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1answer
66 views

Optimisation and Theory of Comparative Advantage

In my school's lecture notes on International Trade, a numerical example of how the Theory of Comparative Advantage is featured. It is a simplified 2-country, 2-goods model and features constant ...
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1answer
54 views

Does comparative advantage sustain over long periods of time?

Let's say that given the same resources, company A can produce 40 pens or 50 pencils, company B can produce 30 pens or 30 pencils. Since A has a comparative advantage in pencils, A decides to ...
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153 views

Why do we say that trade and specialization according to comparative advantage lead to one-time increase in PPF of given country?

PPF shows us different combinations of goods that we would be able to produce if we employed existing resources of our country in the most efficient way. One thing to notice about PPF: It's ...
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1answer
176 views

(Ricardian model)Is it correct that complete specialization in comparative advantage CAN lead to DECREASE in total production?

I have the model in my electronic spreadsheet (created by me) and its results quite suprised me. In short, complete specialization (I just call it specialization) in good where a country has ...
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1answer
48 views

(Modified comparative advantage model)Can trade with a country that only has one industry be mutually beneficial?

Suppose there are two countries, China and Japan. Suppose there are also only two goods, namely food and bronze mirrors. China produces both food and bronze mirrors, while Japan produces only food. In ...
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Does free capital mobility invalidate the basic comparative advantage argument for free trade in goods?

In Herman Daly's article "Economics for a Full World", Daly states that international trade must be regulated because free capital mobility would invalidate the principle of comparative advantage (...
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Real world evidence that voluntary exchange is mutually beneficial?

The other day I was having a debate with a supporter of high taxes. I decided to argue against this by explaining the concept of the deadweight loss of taxation. In order to do so, I started with ...
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137 views

Is comparative advantage undermined by a welfare state?

When liberalising trade with developing economies like China, states like the UK seek to benefit from the comparative advantage of cheaper imports. Cheap imports undercut some native industries (eg. ...
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558 views

Basic question on trade based on comparative advantage

The following question is taken from Economics: Principles and Applications 6th Edition, by Hall and Lieberman. This question about applying the theory of comparative advantage between a ...
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1answer
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Is comparative advantage only beneficial with convex utility functions?

I've been playing around with the numbers associated with the traditional comparative advantage problem provided by Ricardo. (https://en.wikipedia.org/wiki/Comparative_advantage) I looked at ...
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Who exploits comparative advantage in international trade?

Suppose that under autarky, Colombia makes coffee and cars at \$1 and \$2 each, and Japan makes coffee and cars at \$20 and \$10 each. Since Japan has a comparative advantage in car manufacture, the ...
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3k views

Ricardo's theory of comparative advantage for many countries

In textbooks on economics the Ricardo theory of comparative advantages is explained on the example of two countries with two goods. I suppose, there must be generalizations of Ricardo's theory for ...
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Correct Calculation of Balassa Revealed Comparative Advantage (with full trade data)

The typical approach to computing RCA (Revealed Comparative Advantage) is the Balassa definition: $RCA=\frac{\frac{X_cp}{\sum_{p=1}^{P}{X_cp}}}{\frac{\sum_{c=1}^{C}{X_cp}}{\sum_{c=1,p=1}^{C,P}{X_cp}}}...
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Can people lack a comparative advantage and a comparative disadvantage?

Source: Question 9b, p 61, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 8b in Principles of Microeconomics, 4 Ed, 2008 9. Are the following statements true or false? ...
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How is Comparative Advantage a superset of Absolute Advantage? [duplicate]

Source: 'The Theory of Comparative Advantage - Overview', Prof Steven M. Suranovic Advantageous trade based on comparative advantage, then, covers a larger set of circumstances while still ...
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Intuition behind Comparative Advantange

I already read and ask NOT about pp 52-54, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw. I understand such numerical examples that corroborate Comparative Advantage, but how can I ...