"Through international specialization and trade, a nation can reduce its opportunity cost of obtaining goods and thus 'move outside its production possibilities curve.'" By choosing to get the industrial robot from another country the original nation cuts down on its opportunity cost by 1,000 pizzas. This would not be possible if the trade country did not offer a better deal that moves the original nation out of its production possibilities curve. The trade nations specialization decreases production cost and benefits both nations.
Work Step by Step
10,000 pizzas is the cost for one industrial robot if a nation were to trade within itself. However, when another nation offers to trade and specializes in industrial robots, they are willing to trade for only 9,000 pizzas. This decrease of 1,000 pizzas leads to a lower opportunity cost and showcases how international specialization can lower costs for everyone.