1. 1 CHAPTER 16 COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE E CONOMICS U PDATED S ECOND E DITION R OBERT E. H ALL S TANFORD U NIVERSITY M ARC L IEBERMAN N EW Y ORK U NIVERSITY

2. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 2 Table 1Costs of Production

3. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 3 Table 2Opportunity Costs

4. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 4 Table 3A Small Change in Production

5. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 5 Table 4The Gains from Specialization and Trade

6. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 6 Table 5Labor Inputs Needed

7. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 7 Table 6Prices in China and the United States with an Exchange Rate of 8 CNY for $1

8. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 8 Table 7Examples of National Specialties in International Trade CountrySpecialty Resulting from Natural Resources or Climate Saudi ArabiaOil CanadaTimber United StatesGrain SpainOlive oil MexicoTomatoes JamaicaAluminum ore ItalyWine IsraelCitrus fruit Specialty Not Based on Natural Resources or Climate JapanCars, consumer electronics United StatesSoftware, movies, music SwitzerlandWatches KoreaSteel, ships Hong KongTextiles Great BritainFinancial services

9. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 9 Figure 1The Impact of Trade Quantity of Suits Price (Dollars) F Demand China United States Supply Quantity of Suits Price (Dollars) PNPN QNQN E Supply Demand QNQN P N Q2Q2 Q3Q3 B A PTPT CD Q2Q2 Q3Q3 PTPT

10. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 10 Table 8Attitudes Toward Free Trade

11. ECONOMICS UPDATED 2e / HALL & LIEBERMAN CHAPTER 16 / COMPARATIVE ADVANTAGE AND THE GAINS FROM TRADE © 2003 South-Western 11 Figure 2The Effects of a Tariff on Suits China United States Quantity of Suits Price (Dollars) P T CD Supply Demand Quantity of Suits Price (Dollars) P T A B Supply Demand P 2 KL P 3 HJ