Chapta 3

Trade allows people to get goods from all around the world available to them. Trade will make everyone better off. It allows producers to go outside of their production frontier and benefit. Producers view their comparable advantage to another producer who makes different goods and determine who is most efficient and has the least opportunity cost by making whichever good. They then specialize in making that specific good. Opportunity cost is what is given up to get a good. Opportunity cost is used to compare who has a particular advantage at making what. Absolute advantage is having the ability to produce more goods with less inputs. Both trading parties should gain in some sort of way through trade and specialization. If each producers sticks to whichever good they produce the best and trade with one another they will most likely both benefit.