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The International Trade Simulation

This follows that if you produce more of one product then the resulting production for the other product will become lesser because the PPF shows an inverse relation to the production of one product from the production of the other product. Opportunity cost is the amount of output of one product that is sacrificed because of limited resources in order to increase the output of another product by one unit. When a country has a lower opportunity cost in producing one specific product than the other countries neighboring it, then this country has a comparative advantage of producing this product than the other countries and therefore should specialize and focus its resources in efficiently producing this specific product. This specific product or commodity is the ideal product to produce domestically and for export. Comparative advantage and opportunity cost can also be measures of which country to import from and to export to. Import products from countries that have the lowest opportunity cost of producing a specific commodity and therefore would have the higher comparative advantage. In the simulation, Rodamia has the lowest opportunity cost in producing cheese than producing corn and therefore has the comparative advantage of producing cheese as compared to the other countries. Rodamia should produce cheese domestically and export them to the neighboring countries and should import their corn requirements from Uthania. Rodamia also produce and export DVD players since it also has a low opportunity cost for producing them and should import watches from Suntize. .
             Another limitation of international trading is the question of whether to impose trade tariffs or trade quotas to imported commodities from other countries. In the simulation, Suntize is dumping their watches to Rodamia which in turn affects Rodamia's own domestic production and price of watches. Because of too much production of watches from Suntize, Suntize can give the watches at much lower prices than the domestic price of watches in Rodamia.


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