Doomlearn
DE
Money & WorkMental model

Trade pays off even if you're better at everything.

David Ricardo showed in 1817: even if Portugal makes both wine and cloth more cheaply than England, both gain if each produces what it's relatively best at and trades. What matters isn't who is absolutely better, but who gives up less. Same for you: delegate what others can do relatively more cheaply, even if you could do it better.

Useful: A boss who types her own letters instead of leading gives away her comparative advantage.

Source: de.wikipedia.org

DenkmodellHandelWirtschaft

Difficulty:

Question on this card

What is Ricardo's comparative advantage based on?

  1. Who produces most cheaply in absolute terms
  2. Who gives up the least relatively
  3. Who has the biggest factory
  4. Who pays the lowest wages
Show the answer

Correct: Who gives up the least relatively

Opportunity cost is what matters, not absolute cost.

Related cards

Keep reading

This card belongs to the topic Money & Work. Every card is short, cites a source and can be saved – due ones come back by themselves later.

About Doomlearn · Projects · Legal notice · Privacy · Terms