Figure 17.3 Comparative Advantage in Roadway and Seaside Roadway’s production possibilities curve is given in Panel (a); it is the same one we saw inFigure 17.1 "Roadway’s Production Possibilities Curve" and Figure 17.2 "Measuring Opportunity Cost in Roadway" The production possibilities curve for a second hypothetical country, Seaside, is given in Panel (b) If no trade occurs between the two countries, suppose that Roadway is at Point A and that Seaside is at Point A′ Notice that the opportunity cost of an additional boat in Roadway is two trucks, while the opportunity cost of an additional boat in Seaside is 0.2 trucks Clearly, Seaside has a comparative advantage in the production of boats Each country produces two goods, boats and trucks Suppose no trade occurs between the two countries and that they are each currently operating on their production possibilities curves at points A and A′ in Figure 17.3 "Comparative Advantage in Roadway and Seaside" We will assume that the two countries have chosen to operate at these points through the workings of demand and supply That is, resources have been guided to their current uses as producers have responded to the demands Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 891