🚢
Comparative Advantage
AP Macroeconomics · International Trade
Production Possibilities

Two countries dedicate all their resources limits to produce exactly two goods (Wheat and Cars). Linear curves represent constant opportunity cost.

Advantage Types
Absolute Advantage: Who can produce more total output using the same resources. (Higher intercept)
Comparative Advantage: Who can produce the good at a LOWER opportunity cost. (Flatter or steeper slope)
Tags
TradeOpportunity CostPPFSpecialization
Country Alpha (Max Production)
Wheat (per day): 100
Cars (per day): 50
Country Beta (Max Production)
Wheat (per day): 40
Cars (per day): 120
Opportunity Cost Analysis
Country Cost of 1 Car Cost of 1 Wheat
Alpha 2 W 0.5 C
Beta 0.33 W 3.0 C
Alpha has Absolute Adv in Wheat.
Beta has Absolute Adv in Cars.
Specialization:
Alpha should produce Wheat. Beta should produce Cars.