Producing 100 cars here costs 666 computers, while producing 100 cars in Brazil costs 1,000 computers. Clearly the United States benefits from specializing in cars, which it produces more cheaply than Brazil, and trading with Brazil for some of the computers it produces more cheaply. If, for example, the United States produced both cars and computers it might devote 70 units of PR to car production and 30 units to computer production, yielding 3,500 cars and 10,000 computers. If Brazil produced both products, it might devote 56 units of PR to car production and 24 to computer production, yielding 1,400 cars and 6,000 computers. On the other hand, by specializing in their comparative advantages, the United States can produce 5,000 cars and Brazil can produce 20,000 computers, or a total of 100 additional cars and 4,000 additional computers.
Trade is productive since it generates more output of both products.
Low Wages Don't Mean Low Cost Notice that in determining that it is less costly to produce cars in the United States and computers in Brazil, we never mentioned how much U.S. or Brazilian workers are paid. Workers in the United States will be paid more than those in Brazil because they are more productive in our example. So in terms of output, lower wages don't mean lower costs. U.S. workers are less costly at producing cars, but Brazilian workers are less costly at producing computers. This is true no matter what U.S. and Brazilian workers are paid.