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International Economics: Foundations of Modern Trade Theory
International Economics: Foundations of Modern Trade Theory
By Robert J. Carbaugh
9th Edition
Chapter 2:
Foundations of Modern Trade
Theory
Comparative advantage
5 bottles 20 yards
15 bottles 10 yards
40 bottles 40 yards
20 bottles 10 yards
3
Comparative advantage
Labor
Wage
US
1 hr
UK
1 hr
UK
1 hr
(at $1.6 = 1)
$20/hr
5/hr
$8
Carbaugh, Chap. 2
Cloth (yards)
Quant. Price
40
10
10
$0.50
0.50
$0.80
Wine (bottles)
Quant. Price
40
20
20
$0.50
0.25
$0.40
Comparative advantage
Comparative advantage
Carbaugh, Chap. 2
Comparative advantage
Carbaugh, Chap. 2
Comparative advantage
Carbaugh, Chap. 2
Comparative advantage
Carbaugh, Chap. 2
Comparative advantage
After
Specialization
Net Gain
(Loss)
Autos Wheat
Autos Wheat
Autos Wheat
US
Canada
40
40
40
80
120
0
0
160
80
-40
-40
80
World
80
120
120
160
40
40
Carbaugh, Chap. 2
10
Comparative advantage
After
Trade
Net Gain
(Loss)
Autos Wheat
Autos Wheat
Autos Wheat
US
Canada
40
40
40
80
60
60
60
100
20
20
20
20
World
80
120
120
160
40
40
Carbaugh, Chap. 2
11
Comparative advantage
Carbaugh, Chap. 2
12
Comparative advantage
Carbaugh, Chap. 2
13
Comparative advantage
Carbaugh, Chap. 2
14
Carbaugh, Chap. 2
15
Carbaugh, Chap. 2
16
Carbaugh, Chap. 2
17
Carbaugh, Chap. 2
18
After
Specialization
Net Gain
(Loss)
Autos Wheat
Autos Wheat
Autos Wheat
US
Canada
5
17
18
6
12
13
14
13
7
-4
-4
7
World
22
24
25
26
Carbaugh, Chap. 2
19
After
Trade
Net Gain
(Loss)
Autos Wheat
Autos Wheat
Autos Wheat
US
Canada
5
17
18
6
5
20
21
6
0
3
3
0
World
22
24
25
27
Carbaugh, Chap. 2
20