comparative advantage. The United States will export refrigerators and in return import shoes.

How Opportunity Cost Sets the Boundaries of Trade

This example shows that both parties can benefit from specializing in their comparative advantages and

trading. By using the opportunity costs in this example, it is possible to identify the range of possible trades

that would benefit each country.

Mexico started out, before specialization and trade, producing 4,000 pairs of shoes and 5,000 refrigerators (see
Figure 19.4 and Table 19.9). Then, in the numerical example given, Mexico shifted production toward its

comparative advantage and produced 6,000 pairs of shoes but only 2,500 refrigerators. Thus, if Mexico can

export no more than 2,000 pairs of shoes (giving up 2,000 pairs of shoes) in exchange for imports of at least

2,500 refrigerators (a gain of 2,500 refrigerators), it will be able to consume more of both goods than before
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