International Trade - Theory and Policy, 2010a

−aLCaLW⎡⎣⎢hrslbhrsgal=gallb⎤⎦⎥.
Thus the slope of the PPF expresses the number of gallons of wine that must be given up (hence the minus
sign) to produce another pound of cheese. Hence it is the opportunity cost of cheese production (in terms
of wine). The reciprocal of the slope, −(aLW/aLC), in turn represents the opportunity cost of wine
production (in terms of cheese).
Since in the Ricardian model the PPF is linear, the opportunity cost is the same at all possible production
points along the PPF. For this reason, the Ricardian model is sometimes referred to as a constant
(opportunity) cost model.
Comparative Advantage
Using Opportunity Costs
A country has a comparative advantage in the production of a good if it can produce that good at a lower
opportunity cost relative to another country. Thus the United States has a comparative advantage in
cheese production relative to France if
aLCaLW