United States is going to give up 100 bushels of corn in exports, it must import at least 50 barrels of oil to be just as

well off. Clearly, to gain from trade it needs to be able to gain more than a half barrel of oil for its bushel of corn—or

why trade at all?

Recall that David Ricardo argued that if each country specializes in its comparative advantage, it will benefit

from trade, and total global output will increase. How can we show gains from trade as a result of comparative

advantage and specialization? Table 19.6 shows the output assuming that each country specializes in its

comparative advantage and produces no other good. This is 100% specialization. Specialization leads to an

increase in total world production. (Compare the total world production in Table 19.3 to that in Table 19.6.)

Country

Quantity produced after 100%

Quantity produced after 100% specialization

specialization — Oil (barrels)

— Corn (bushels)

Saudi Arabia

100

United States

0

Total World
{"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "creator": "PDFMiner", "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "file_name": "Microeconomics3e.pdf", "file_type": ".pdf", "moddate": "2022-12-07T14:23:05-06:00", "creationdate": "2022-12-07T14:15:44-06:00", "file_size_mb": 26.99, "title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "producer": "Prince 14.2 (www.princexml.com)", "upload_timestamp": "2026-02-07T15:37:44.339247", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a"}