Ch. 3 Interdependence and the Gains from Trade

absolute advantage

the ability to produce a good using fewer inputs than another producer

comparative advantage

the ability to produce a good at a lower opportunity cost than another producer

the general rule for the price of trade states that

for both parties to gain from trade, the price at which they trade must lie between the two opportunity costs

imports

goods produced abroad and sold domestically

exports

goods produced domestically and sold abroad

International trade can make some individuals ___ off, even as it makes the country as a whole ____ off.

worse

better

a person can buy/obtain a good at a price that is

lower than their opportunity cost

a country can have a ____ advantage in the production of a good even if it does not have a _____ advantage in the production of that good

comparative

absolute