(4) The PPF and Comparative Advantage
Production Possibilities Frontier
Production Possibilities Frontier, PPF, Comparative Advantage, Absolute Advantage, Gains from Trade
The concept of comparative advantage is explained and contrasted with absolute advantage. Comparative advantage is shown to be the basis for mutual gains from exchange.
Crane, Steven E., "(4) The PPF and Comparative Advantage" (2010). Principles of Microeconomics. Paper 3.
Ability to Calculate Terms of Trade. Ability to identify Absolute and Comparative Advantage. Ability to determine who should specialize in what. Ability to demonstrate mutual gains from trade.
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