Full employment will be restored, which means both countries will be back at the same level of employment they had before trade Finally, note the fact that the two countries end up at C (Panel (a)) and C′ (Panel (b)) These points lie outside the production possibilities curves of both countries Notice that each country produceson its production possibilities curve, but international trade allows both countries to consume a combination of goods they would be incapable of producing! We see this same phenomenon in individual households Each household specializes in an activity in which it has a comparative advantage For one household, that may be landscaping, for another, it may be the practice of medicine, for another it may be the provision of childcare Whatever the activity, specialization allows the household to earn income that can be used to purchase housing, food, clothing, and so on Imagine for a moment how your household would fare if it had to produce every good or service it consumed The members of such a household would work very hard, but it is inconceivable that the household could survive if it relied on itself for everything it consumed By specializing in the activity in which each individual has a comparative advantage, people are able to consume far more than they could produce themselves Despite the transitional problems affecting some factors of production, the potential benefits from free trade are large For this reason, most economists are strongly in favor of opening markets and extending international trade throughout the world The economic case has been a powerful force in moving the world toward freer trade KEY TAKEAWAYS Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 899