Introduction to Comparative Advantage and Trade

The video explores the concept of comparative advantage, focusing on opportunity costs and how they incentivize trade. It explains the difference between absolute and comparative advantage, using examples of France and Poland producing wine and milk. The video also discusses production possibility frontiers and the limitations of the theory, such as ignoring transportation costs and economies of scale.

What is the main difference between absolute advantage and comparative advantage?

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Explain the concept of opportunity cost in the context of comparative advantage.

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How does specialization based on comparative advantage lead to increased welfare?

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Describe the production possibility curve and its relevance to comparative advantage.

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What happens when a country has an absolute advantage in all goods?

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How do France and Poland demonstrate the principles of absolute and comparative advantage?

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What are the implications of having no opportunity cost differential between two countries?

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Discuss the limitations of the theory of comparative advantage.

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How can branding affect the principles of comparative advantage?

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In what ways do transportation costs influence trade decisions according to the theory of comparative advantage?

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