its leather from Brazil; Brazil should produce leather and buy its
fish from Argentina.
Example #2
Switzerland and Austria can both produce glass and chocolate.
Each country has 1000 units of identical resources, which we
will call “labour.” The table shows the maximum amount of
each good that each country could produce if it devoted all of
its labour to the production of that good.
Glass (tonnes) Chocolate (kg)Austria 5000 400 000Switzerland 4000 200 000Absolute Advantage Each unit of labour in Austria can
produce 5 tonnes of glass or 400 kg of chocolate. The identical
unit of labour in Switzerland can produce only 4 tonnes of glass
or 200 kg of chocolate. Switzerland is less efficient than Austria
in the production of both goods; Austria therefore has the
absolute advantage in both goods.
Comparative Advantage Once again, we need to know the
opportunity costs of production. In Austria, producing one