Chile and Zambia have some of the world’s richest copper mines. As some have argued, “geography is destiny.”

Chile will provide copper and Guatemala will produce coffee, and they will trade. When each country has a

product others need and it can produce it with fewer resources in one country than in another, then it is easy to
imagine all parties benefitting from trade. However, thinking about trade just in terms of geography and
absolute advantage is incomplete. Trade really occurs because of comparative advantage.

Recall from the chapter Choice in a World of Scarcity that a country has a comparative advantage when it can

produce a good at a lower cost in terms of other goods. The question each country or company should be

asking when it trades is this: “What do we give up to produce this good?” It should be no surprise that the

concept of comparative advantage is based on this idea of opportunity cost from Choice in a World of Scarcity.
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