comprehension of Chapter 2 concepts.

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Using the production possibilities frontiers for USA and VENEZUELA provided below, explain which group has a comparative advantage over which type of goods.  Is it rational for USA to trade with VENEZUELA?  Explain.  Suggest some barriers to trade that might exist which would eliminate the potential advantages to specialization and trade.  What will keep each group from overcharging the other for their specialized product?

OIL        TECHNOLOGY

USA                             200            1000

 

VENEZUELA            150            200

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