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    I have been trying to do this one comparative advantage/international trade question. And, although I have the answer, I dont understand why. Its one of the multiple-choice type. I was wondering if anyone could explain it to me. Hopefully, I have attached the word document to this message which has the diagram on it.

    Its just really bugging me now. And I know there'll be a question on it in my exam tomorrow morning..
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    (Original post by Jessie)
    I have been trying to do this one comparative advantage/international trade question. And, although I have the answer, I dont understand why. Its one of the multiple-choice type. I was wondering if anyone could explain it to me. Hopefully, I have attached the word document to this message which has the diagram on it.

    Its just really bugging me now. And I know there'll be a question on it in my exam tomorrow morning..
    i have no idea!
    i dont get it
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    Plug in some numbers.

    Production:
    A: 3
    B: 3

    Trading:
    A: 5
    B: 2

    It trades 2 of good B for 5 of good A. This is beneficial as it can only produces 1 good of good A for every good B. Thus, specialising in good B is beneficial to it as it has a lower domestic opportunity ratio (1:1 as opposed to 2.5:1) than the country it is trading with. Thus specialise in B and export B, import A.

    Hope this is right
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    thank you...i think i understand it now...i just hate comparative advanatge and trade in multiple-choice questions.. :mad:
 
 
 

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