doing other things The result is a far greater quantity of goods and services than would be available without this specialization Think about what life would be like without specialization Imagine that you are suddenly completely cut off from the rest of the economy You must produce everything you consume; you obtain nothing from anyone else Would you be able to consume what you consume now? Clearly not It is hard to imagine that most of us could even survive in such a setting The gains we achieve through specialization are enormous Nations specialize as well Much of the land in the United States has a comparative advantage in agricultural production and is devoted to that activity Hong Kong, with its huge population and tiny endowment of land, allocates virtually none of its land to agricultural use; that option would be too costly Its land is devoted largely to nonagricultural use KEY TAKEAWAYS A production possibilities curve shows the combinations of two goods an economy is capable of producing The downward slope of the production possibilities curve is an implication of scarcity The bowed-out shape of the production possibilities curve results from allocating resources based on comparative advantage Such an allocation implies that the law of increasing opportunity cost will hold An economy that fails to make full and efficient use of its factors of production will operate inside its production possibilities curve Specialization means that an economy is producing the goods and services in which it has a comparative advantage Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 84