a country has a comparative advantage in the production of a good if it can This is a topic that many people are looking for. thetruthaboutdow.org is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, thetruthaboutdow.org would like to introduce to you Can two Countries Benefit from Trade if neither has a Comparative Advantage?. Following along are instructions in the video below:
“There econ students and teachers. We ve now seen several cases in which countries that that produce goods in which they have a comparative advantage trade with one another thereby. What we call gains from trade in this lesson. We re going to be looking at a case in which two countries have identical opportunity costs for two different goods.
Therefore. There s no potential gains from trade with one another in the real world of course. Countries are always going to be able to produce certain goods at a lower opportunity cost than potential trading partners. Enjoy the video subscribe to my channel and head over to econ classroom comm for more great resources for economics.
Students and teachers now there s one more concept. You want to explore before we wrap up this lesson on comparative advantage and the gains from trade..
Let s scroll down. And look. At one more production possibilities curve for the two countries. A and b at our label.
A here now something s different about this ppc from our original. If we look back up at the original ppc that we started this lesson with notice that country a could produce either six pairs of shoes or eight basketballs and that gave country a a comparative advantage in the production of basketballs. If we look at our final ppc in this lesson. You ll see the country.
A can now produce either eight pairs of shoes or eight. Basketballs..
Giving country a the same domestic opportunity cost as country b. So. Now for both countries in both a and b. The opportunity costs are identical.
One pair of shoes costs. One basketball in country. A and one pair of shoes costs. One basketball in country b.
Now one of our assumptions. When studying international trade in economics is that countries can almost always benefit from trade with other countries..
And that s true as long as one country has a comparative advantage in the production of a good relative to another country and could produce that good at a lower opportunity cost. But if we look at the production possibilities curve that we have here there is no comparative advantage. There s no there s no comparative advantage in this case. There are no potential gains from trade.
There s no way that these two countries can benefit from trading basketballs and shoes with one another. Now. This is a pretty rare example in the real world. There s always going to be a or a service that a country can produce at a lower opportunity cost than some other country.
There s very few countries that cannot benefit from trade with one another in fact. It s safe to say..
There s no countries that would be better off without trade with other countries. But in some circumstances. It might be the case that two countries with very similar resources similar types of land labor and capital might not stand to benefit from trading with one another in a situation. In which two countries have the identical opportunity costs as one another.
There is actually no reason for these countries to trade because there s no way for country a in this case to take advantage of country b s lower opportunity cost in either of the two goods. Because country b. Has the same opportunity cost in the two goods. ” .
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