Identify the two producers, countries, or individuals being compared
Determine the output each can produce with the same amount of resources
Calculate the opportunity cost of producing one unit of each good for each producer
Compare the opportunity costs between producers
The producer with the lower opportunity cost has the comparative advantage in that good
Repeat the comparison for the other good
If one producer has a lower opportunity cost in one good, the other producer has the comparative advantage in the other good
Use the formula: Opportunity cost of good A = units of good B forgone divided by units of good A produced
Use the formula: Opportunity cost of good B = units of good A forgone divided by units of good B produced
Choose the producer with the smallest opportunity cost for each good
Compare relative efficiency, not absolute output
If needed, build a production possibilities table to organize the calculations