Trade in a Market Economy

The ability to produce a good at a lower opportunity cost than another.

Limits their consumption to what they can produce individually.

Absolute advantage means being better at producing everything, but comparative advantage focuses on being better at producing specific goods.

Trade allows for gains by utilizing comparative advantage.

Trade is beneficial because it allows countries to specialize based on their comparative advantages.

Trade allows countries to obtain goods they do not produce efficiently.

U.S. production with trade.

Canadian consumption with trade.