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In this video, we explore how we can use opportunity costs to determine who has comparative advantage in producing a good. By specializing in the production of a good that a country has comparative advantage in, and trading for the other good, both countries have the potential to benefit from the exchange. We can also figure out a trading price (also known as the "terms of trade") which would make both countries willing to trade.
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AP Macroeconomics on Khan Academy: Welcome to Economics! In this lesson we'll define Economic and introduce some of the fundamental tools and perspectives economists use to understand the world around us!
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