NOBODY CAN HAVE A COMPARATIVE ADVANTAGE IN EVERYTHING!
In class, we created graphs, which showed that Rochester has an absolute advantage in producing cameras in comparison to Cornell. Rochester also has an absolute advantage at making wine over Cornell.
We also computed opportunity cost, where we saw that Rochester has the least opportunity cost, making them the most "efficient". So we say that Rochester has a comparative advantage over Cornell.
When we ask who is more "efficient" we are really asking who sacrifices the least when producing goods. Therefore, who can provide wine for a lower cost? Here, price is nothing more than a trade-off.
When we talked about trade and specialization we saw that it makes all parties better off. What matters for trade are relative price differences within each country. Also self-sufficiency is that way to poverty. Policies that restrict trade will make you poor. Restricting trade is costly. You pay for your imports with exports, every export is used to buy an import, there is a circular flow.
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