recap from econ last year

Question 1

COMPARATIVE ADVANTAGE vs absolute advantage

Answer 1

*COMPARATIVE ADVANTAGE: a nation gains by specializing in producing and exporting what it produces most efficiently.

*ABSOLUTE ADVANTAGE: the ability to do something better than others

Question 2

why is trade beneficial?

Answer 2

With free trade, a country can export what its good (most efficient) at producing and import what its bad (least efficient) at producing

Importing goods that aren’t made efficiently here, allows for us to focus on what we do efficiently.

This prevents waste and allows us to produce more

Producing more →more $$$

Question 3

Public Goods

Answer 3

Socially desirable products defined by two qualities

Nonexcludable
Nonrival in consumption

*Achieving public goods is hindered by collective action problems
*Contrast to Private Goods

Nonexcludable: can’t prevent consumption by others

Nonrival: Consumption by one doesn’t hinder consumption by others

Examples:National defenseClean air and waterPublic radioRoads and BridgesCommon currencyFREE TRADE!79