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ECON 103

Why can both sides gain from trade?

Learn opportunity cost, production frontiers and how comparative advantage guides specialization and trade. Solve 10 questions with editable numbers and worked answers.

Making choices · Step 1 of 12

Limited resources mean choosing

Production possibilities and consumption
Y: mistkits
TF
X: glowpods
F. Marked point T.
F: production frontier
T: 24 glowpods, 12 mistkits
Everything in our example is invented. Glimmer Workshop A can use a working day to make 48 glowpods, 24 mistkits, or a mix of both. Its limited time creates scarcity: making more of one good leaves less time for the other.
Try it: Move glowpod output and follow the mix the same day can produce.
Glowpods made in one day24
Glowpods
24
Mistkits
12
Time used
100%
Y = Ymax − (Ymax ÷ Xmax) × X.
Y = (24 − (24 ÷ 48) × 24) = 12 mistkits.
The same working day supports this mix; it cannot support every mix we might want.
Check yourself
On this frontier, resources and technology stay fixed. Making more glowpods means…

Exam coming up and comparative advantage still feels backwards?

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