allows both countries to consume more than they are capable of producing How does Seaside fare? When trade began, factors of production shifted into boat production, in which Seaside had a comparative advantage Seaside tripled its production of boats—from 2,000 per year to 6,000 per year It sends 2,500 of those boats to Roadway, so it ends up with 3,500 boats per year It reduces its production of trucks to 3,000 per year, but receives 2,500 more from Roadway That leaves it with 5,500 Seaside emerges from the opening of trade with 1,500 more boats and 750 more trucks than it had before trade As Roadway trades trucks for boats, its production remains at point B But it now consumes combination C; it has more of both goods than it had at A, the solution before trade Seaside’s production remains at point B′, but it now consumes at point C′, where it has more trucks and more boats than it had before trade Although all countries can increase their consumption through trade, not everyone in those countries will be happy with the result In the case of Roadway and Seaside, for example, some boat producers in Roadway will be displaced as cheaper boats arrive from Seaside Some truck producers in Seaside will be displaced as cheaper trucks arrive from Roadway The production possibilities model suggests that the resources displaced will ultimately find more productive uses They will produce trucks in Roadway and boats in Seaside But there will be a period of painful transition as workers and owners of capital and natural resources move from one activity to another That transition will be completed when the two countries are back on their respective production possibilities curves Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 898