Specialize and optimize opportunity costs

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Reference no: EM131775937

The Discussion topics include the difference between microeconomics and macroeconomics, the two basic economic models of the Circular-Flow Diagram and the Production Possibility Frontier, and comparative advantage, which is the main force behind interdependence in the market economy and the gains from trade.

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The theory of comparative advantage states that there are gains from trade if countries specialize and optimize their opportunity costs.

  1. Why is comparative advantage a driving force behind trade behind trade between regions and countries?
  2. Why does specialization lead to welfare improvement? Why engaging in trade is better than trying to be self-sufficient?

Reference no: EM131775937

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