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Krugman and Obstfeld make sure to challenge three commonly held “misconceptions about comparative advantage”. They make their arguments intuitively and with little discussion of relative prices. Expand on the challenge to these three “myths”. Use the math and the graphs we developed in class and in the textbook to make the points K&O make. Focus on relative prices and wages. Start from our four basic equations and carefully (step by step) show how you reach your conclusions. Also, critically evaluate the statements of K&O, in particular focus on the assumptions of the Ricardian model that make comparative advantage a less than perfect representation of the real world.
economyst
answered
15 years ago
15 years ago