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Production and Gains from Trade

Author

Listed:
  • Lisa R. Anderson

    () (Department of Economics, College of William and Mary)

  • Emily Blanchard

    () (Department of Economics, University of Virginia)

  • Kelly Chaston

    () (Department of Economics, Davidson College)

  • Charles Holt

    () (Department of Economics, University of Virginia)

  • Laura Razzolini

    () (Department of Economics, Virginia Commonwealth University)

  • Robert Singleton

    () (Department of Economics, Loyola Marymount University)

Abstract

This paper describes a classroom game in which students make production and trade decisions. Each student represents a country and decides how much of two goods to produce, how much to exchange with a partner country, and whether to specialize in the production of one of the two goods. In introductory level classes, the game helps students understand the notion of comparative advantage in production and distinguish between gains from pure exchange and gains from specialization and trade. Class discussion focuses on the concepts of production possibility frontier, marginal productivity of inputs, and on the determination of the price ratio at which trade may occur. In advanced classes, the exercise facilitates comparisons among different models of international trade and serves as a platform from which to introduce and discuss key issues in current research and public debate.

Suggested Citation

  • Lisa R. Anderson & Emily Blanchard & Kelly Chaston & Charles Holt & Laura Razzolini & Robert Singleton, 2005. "Production and Gains from Trade," Working Papers 16, Department of Economics, College of William and Mary.
  • Handle: RePEc:cwm:wpaper:16
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    File URL: http://economics.wm.edu/wp/cwm_wp16.pdf
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    More about this item

    Keywords

    Classroom Experiment; International Trade; Comparative Advantage; Production Possibility Frontier; Price Ratio;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • A22 - General Economics and Teaching - - Economic Education and Teaching of Economics - - - Undergraduate

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