Question
David Friedman provides us with an example to better understand comparative advantage: There are two ways we can produce automobiles. We can build them in
David Friedman provides us with an example to better understand comparative advantage:
There are two ways we can produce automobiles. We can build them in Detroit or we can grow them in Iowa. Everyone knows how we build automobiles. To grow automobiles, we begin by growing the raw material from which they are made--wheat. We put the wheat on ships and send the ships out into the Pacific. They come back with Hondas on them.
Comparative advantage has more to do with comparing domestic producers to domestic producers. The absolute advantage would be comparing domestic car companies to foreign ones.
The implication here is that when import tariffs are placed on foreign cars to protect domestic manufacturers, they actually harm domestic producers of wheat (or other agricultural commodities).
There have been many new tariffs placed on different products and countries over the last year. What is a specific example and discuss the event within the above context.
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