Cloth, Wine, and Trade

In the picture

1. 1A wooden loom with three cloth bolts: cloth-making on one shore.
2. 2Vine rows with three barrels: wine-making on the other shore.
3. 3A cargo ship carrying cloth across the sea: cloth sent from its shore to the other.
4. 4A second cargo ship carrying barrels across the sea: wine sent from its shore to the other.

Examples

• Two roommates divide chores: one cooks because it costs less study time, the other cleans because it costs less study time, and both get more free time.
• A small bakery has one baker who is fast at bread and one who is fast at cakes; they split the work and sell more of both.

Quiz: Cloth, Wine, and Trade (Age 18)

1. 1

   According to the card, a country should specialise in the good that:

   • it can produce in the greatest total amount.
   • has the lower opportunity cost for that country.
   • requires the most workers to make.
2. 2

   What can trade allow both countries to do?

   • Consume more cloth and wine than they could produce alone.
   • Ignore opportunity costs in production.
   • Make every good themselves without specialising.
3. 3

   What is the main lesson of Cloth, Wine, and Trade?

   • Only the country that is absolutely best at making a good should produce it.
   • Specialising where opportunity cost is lower and trading can let both countries consume more than if each made everything alone.
   • Each country should make both cloth and wine to avoid depending on trade.

The answers, each with its explanation, are in the app. This lesson has left the free week, so its quiz is part of the subscription.