Exam 2: Comparative Advantage: How Nations Can Gain From International Trade

The value of each and every alternative value sacrificed in order to obtain an item is the item's opportunity cost.

Absent any trade, a country's residents either can produce 1,000 laptop computers and 500 computer servers per week, or can produce 750 laptop computers and 750 computer servers per week. After trade takes place, its residents either can consume both 1,000 laptop computers and 600 computer servers, or can consume both 850 laptop computers and 750 computer servers. These outcomes represent:

A nation-s production possibilities frontier is a graph of the various possible combinations of total feasible production rates for two items within that country.

The possession of redistribution advantage in the production of two different items by residents of two countries suggests that specialization and international trade can boost the two nations' combined total output.