Problem Set for ECONOMICS 105-all answres correct-graded A

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Economics 105: Principles of Macroeconomics Problem set #2 1. Why do people choose to become interdependent as opposed to self-sufficient? People choose to become interdependent as opposed to self-... sufficient because when your interdependent you tend to trade more goods, and be provided goods that you don't specialize in. 2. Why is comparative advantage instead of absolute advantage important in determining trade? It is possible that one person or country to has absolute advantage in all goods, but it is not possible that one person or country to has comparative advantage in everything. When one person or country has comparative on a good, it means that the person or country has lower opportunity cost of the good. Therefore, he can benefit and better off from trade [Show More]

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