written by Daurie Augostine

-- written by Daurie Augostine



Sunday, January 31, 2010

Gains from Specialization

Suppose France and the U.S. both specialize in production according to their respective comparative advantages ..........

France produces wine and the U.S. produces cheese; thus, both countries now "specialize" in production.


Now, production information should look like this:

France --- 10 wine, 0 cheese

U.S. --- 0 wine, 20 cheese

After specialization, total world output equals 30 units of both goods (instead of 27); thus, clearly a gain in production!