What is comparative advantage, and why is it important in international trade? S

Question

What is comparative advantage, and why is it important in international trade? Steve and Craig have been shipwrecked on a deserted island in the South Pacific. Their economy activity consists of either gathering pineapples or fishing. We know Steve can catch four fish in one hour or harvest two baskets of baskets of pineapples. In the same time Craig can reel in two fish or harvest two baskets of pineapples. Assume Craig and Steve both operate on straight-line production possibilities curves. What is Steve's opportunity cost of producing a basket of pineapples? Of a producing a fish? What is Craig's opportunity cost of producing a basket of pineapples? Of a producing a fish? Identify the exchange rate that equalizes the prices of internationally traded goods across countries and briefly discuss the main functions this exchange rate serves. Briefly discuss the shortcomings of environmental command-and-control regulations. Briefly explain what is meant by the term "externality" and how it occurs

Explanation / Answer

4. if we are able to produce more ouput than others because of some reasons this is called comprative advantage

6. a product should be available at one price to the customers around the world

7. controlling the environment is environmental control

8. externality means getting the external benefits

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