1. Explain the concepts of Comparative and Absolute Advantage.;Read the following articles about the debate on free trade. It is also useful to review Chapter 2 from the background material section.;Blinder, A.S. "Free Trade." Library of Economics and Liberty. Retrieved May 17, 2010 from: http://www.econlib.org/library/Enc/FreeTrade.html;Ferguson, R. W. (2004). "Free Trade: What Do Economists Really Know?" Retrieved November 4, 2010 from: http://www.federalreserve.gov/boarddocs/speeches/2004/20041007/default.htm;Friedman, M. (1997) "The Case for Free Trade." Hoover Digest. Retrieved May 17, 2010 from: click here;For another numerical example, please click: Calculating Opportunity Cost;Suppose the USA and Canada are considering to trade. Assume there are only two goods in the economy: wheat and corn. The table below illustrates what each country can produce in a given year.;Wheat Corn;USA 4 2;Canada 5 8;In this case, which country should produce wheat? Why? Hint: calculate the opportunity cost for each country. For instance, USA can produce 4 units of wheat OR 2 units of Corn. In this case, if the USA produces one unit of corn, then it has to give up 2 units of wheat. Be sure to review the handout for this module. You can also check out another example by clicking here.;2. How does trade affect the production possibilities frontier? Explain.;3. What other factors can expand the production possibilites frontier. Explain.;4. Give an argument for or against trade. Explain your reasons. Be sure to support your answer.
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