Wednesday, July 28, 2010

Comparative Advantage and Tradeoffs

When discussing comparative advantage, students will often ask if it's possible for a nation to gain a comparative advantage where there originally is none. The answer of course lurks in that basic concept opportunity cost. Don Boudreaux at Cafe Hayek gives a good explanation while discussing the idea of energy independence.

I would suggest you could even use a production function to help with the explanation. What do you think?

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