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Question: 4 specialization and trade when a country has a comparative...

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4. Specialization and trade When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lower opportunity cost than its trading partner. Then the country will specialize in the production of this good and trade it for other goods. The following graphs show the production possibilities frontiers (PPFs) for Candonia and Lamponia. Both countries produce grain and tea, each initially i.e., before specialization and trade) producing 12 million pounds of grain and 6 million pounds of tea, as indicated by the grey stars marked with the letter A 24 PP 0 4 812 16 20 24 28 32 GRAIN (Mllions of pounds) 0 4 812 16 20 24 28 32 GRAIN (Mllions of pounds) Candonia has a comparative advantage in the production of production of comparative advantage. After specialization, the two countries can produce a total of ,while Lamponia has a comparative advantage in the Suppose that Candonia and Lamponia specialize in the production of the goods in which each has a million pounds of tea and million pounds of

Suppose that Candonia and Lamponia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. The countries decide to exchange 4 million pounds of grain for 4 million pounds of tea. This ratio of goods is known as the price of trade between Candonia and Lamponia. The following graph shows the same PPF for Candonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Candonias consumption ater trade Note: Dashed drop lines will automatically extend to both axes Candonla Cansumption After Trade 24 PPF 041216 2024 28 32 GRAIN (Mllions of paunds The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at point A.

The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at point A. As you did for Candonia, place a black point (plus symbol) on the following graph to indlicate Lamponias consumption after trade. Lamponla Cansumption After Trade 0 46 20 24283 GRAIN (Mllions of paunds True or False: Without engaging in international trade, bundles. (Hint: Base this question on the answers you previously entered on this page.) have been abl O True O False Grada It Now Save & Continuc Continue withaut saving

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