A One-Factor Economy The above relations imply that if the relative price of cheese(PclPw) exceeds its opportunity cost(ac/aLw then the economy will specialize in the production of cheese or plar>pula LW In the absence of trade, both goods are produced, and the erefore PclPw=alc/aLw Copyright C 2003 Pearson Education, Inc Slide 1-16Copyright © 2003 Pearson Education, Inc. Slide 1-16 ▪ The above relations imply that if the relative price of cheese (PC / PW ) exceeds its opportunity cost (aLC / aLW), then the economy will specialize in the production of cheese.Or PC/aLC>PW/aLW. ▪ In the absence of trade, both goods are produced, and therefore PC / PW = aLC /aLW. A One-Factor Economy