Teaching Comparative Advantage and International Trade: Pitfalls and Opportunities

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ABSTRACT

This paper discusses pitfalls and opportunities in teaching (and writing about) comparative advantage at the introductory or "principles" level of instruction. We propose that instructors might improve their treatment of this topic by using fractions to represent relative opportunity costs, the true basis of comparative advantage. Using that simple instructional device can be a very effective way to convey the essence of comparative advantage and develop less-than-obvious implications for international trade, such as the fact that domestic firms compete against other domestic firms - not just their foreign counterpoints - in the determination of comparative advantage, …