This exercise will offer students the opportunity to explore the concept of comparative advantage as well as the chance to review the construction of a production possibilities curve.

Material Needed

Graph paper or prepared graphs for each student
Worksheet

Have the students pair up, letting one choose to be Mexico and the other the United States. Give them the following Production Possibilities Schedules for trucks and computers.

Have the students draw their PPCs. Then ask each student to pick a point along his or her curve that he or she likes. Having chosen these points, have the students find a way to trade trucks and computers so that each is better off - each gets more of something without getting less of something else.

While individual student results will differ, the instructor should reinforce the basic meaning of the production possibilities curve and the concept of opportunity cost. Once the various combinations are plotted, students should be encouraged to discuss why they chose a particular point on the PPC for production and how they determined that trade should take place. They should be able to quantify the advantages of trade among the two nations.