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  • I could make 20 Rubik's cubes or 20 board games, Phil.
  • Nice, Bob.  I could make 10 Rubik's cubes or 5 board games.
  • Maybe if we use specialization and trade we can make more products.
  • That's a good idea. Let's calculate our opportunity costs to see what we should do.
  • My opportunity cost for making 1 Rubik's cube is 1 board game. My opportunity cost for making 1 board game is 1 Rubik's cube.
  • It costs me 1/2 board took make 1 Rubik's cube and 2 Rubik's cube to make 1 board game.
  • I have the absolute advantage in making both the Rubik's cube and board games.
  • And I have the comparative advantage in making Rubik's cubes because I have the lowest oppurtunity cost.
  • I should specialize in making Board games because I have the absolute advantage.
  • I should specialize in making Rubik's cubes because I have the comparative advantage.
  • With specialization we increased our total production value.
  • Yeah, we did great!
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