Complete specialization
Consider the case in which each country completely specializes in producing the good for which it has a comparative advantage. Portugal has the comparative advantage in wine and England in cloth, so complete specialization would mean Portugal exclusively produces wine and England exclusively produces cloth. The following table represents this allocation of production.
Complete specialization
| Wine | Cloth | |
|---|---|---|
| Portugal | 1,000 | 0 |
| England | 0 | 3,750 |
| Total | 1,000 | 3,750 |
Let’s bring back the self-sufficiency production table to compare total output under self-sufficiency and complete specialization:
Self-sufficiency
When will trade benefit both countries?
If total output of both goods increases with complete specialization, there will be a way for Portugal and England to trade and both benefit.
However, what happens when complete specialization does not increase total output? If it only increases total production for one good and not for the other, what can we say about whether trade will benefit both countries? In the next tab, we will define incomplete specialization, which provides a solution for these cases.
Exercise
How does total output compare under self-sufficiency (Portugal 45% wine production/England 40% wine production) and complete specialization?
- Add the total amount of wine produced under self-sufficiency (450 + 500 = 950 bottles) and the total amount of cloth (1,100 + 2,250 = 3,350 meters). Try repeating this process for the scenario where Portugal and England specialize in a single good. Then, compare your numbers to the wine and cloth totals under complete specialization. Which scenario has the most wine and which has the most cloth?
- Total output is higher for both goods under complete specialization. There are 1,000 bottles of wine under complete specialization and only 950 under self-sufficiency. Similarily, there are 3,750 meters of cloth under complete specialization and only 3,350 under self-sufficiency.
- Add the total amount of wine produced under self-sufficiency (450 + 500 = 950 bottles) and the total amount of cloth (1,100 + 2,250 = 3,350 meters). Try repeating this process for the scenario where Portugal and England specialize in a single good. Then, compare your numbers to the wine and cloth totals under complete specialization. Which scenario has the most wine and which has the most cloth?
- Add the total amount of wine produced under self-sufficiency (450 + 500 = 950 bottles) and the total amount of cloth (1,100 + 2,250 = 3,350 meters). Try repeating this process for the scenario where Portugal and England specialize in a single good. Then, compare your numbers to the wine and cloth totals under complete specialization. Which scenario has the most wine and which has the most cloth?
- Add the total amount of wine produced under self-sufficiency (450 + 500 = 950 bottles) and the total amount of cloth (1,100 + 2,250 = 3,350 meters). Try repeating this process for the scenario where Portugal and England specialize in a single good. Then, compare your numbers to the wine and cloth totals under complete specialization. Which scenario has the most wine and which has the most cloth?