O O C5

0 Goods for the present 0 Goods for the present

Part One • An Introduction to Economics and the Economy of capital goods, Zorn is choosing to make larger current additions to its "national factory"—to invest more of its current output—than Alta. The payoff from this choice for Zorn is more rapid growth—greater future production capacity. The opportunity cost is fewer consumer goods in the present for Zorn to enjoy. (See Global Perspective 2.1.)

Is Zorn's choice thus "better" than Alta's? That, we cannot say. The different outcomes simply reflect different preferences and priorities in the two countries. (Key Question 10 and 11)

A Qualification: International Trade

Production possibilities analysis implies that a nation is limited to the combinations of output indicated by its production possibilities curve. But we must modify this rin-ciple when international specialization and trade exist.

You will see in later chapters that an economy can avoid, through international specialization and trade, the output limits imposed by its domestic production possibilities curve. International specialization means directing domestic resources to output that a nation is highly efficient at producing. International trade involves the exchange of these goods for goods produced abroad. Specialization and trade enable a nation to get more of a desired good at less sacrifice of some other good. Rather than sacrifice three robots to get a third unit of pizza, as in Table 2-1, a nation might be able to obtain the third unit of pizza by trading only two units of robots for it. Specialization and trade have the same effect as having more and better resources or discovering improved production techniques; both increase the quantities of capital and consumer goods available to society.

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