extra tonne of glass requires giving up
of chocolate. In Switzerland, producing one extra tonne of
glass “costs” of chocolate. Switzerland
has the lower opportunity cost for glass and thus has the
comparative advantage in glass production. It follows that
Austria must have the comparative advantage in the production
of chocolate. Austria’s opportunity cost of 1 kg of chocolate is
1/80 tonne of glass, whereas Switzerland’s opportunity cost of
1 kg of chocolate is 1/50 tonne of glass.
Specialization If the two countries engaged in international
trade, total output would be maximized if Austria specialized in
the production of chocolate and Switzerland specialized in the
production of glass.
80 kg (= 400000 / 5000 )50 kg (= 200000 / 4000 )