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

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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 good The following graphs show the production possibilities frontiers (PPFs) for Freedonia and Lamponia. Both countries produce grain a tea, each initially (Qie., before specialization and trade) producing 24 million pounds of grain and 12 milion pounds of tea, as indicated by the grey stars marked with the letter A Freedonia 64 64 T 56 48 40 32 24 PPF 16 56 8 PPF 8 32 24 16 16 243240 4464 01 24 2 4 48 GRAIN (Milions of pounds) 4 GRAIN (Milions of pounds) Freedonia has a comparative advantage in the production of advantage in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of , while Lamponia has a comparative . Suppose that Freedonia and Lamponia specialize in the production of million pounds of tea and million pounds of grain. Suppose that Freedonia 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 24 milli
uppose that Freedonia and Lamponia agree to trade. Each country focuses its resources on producding only the good in which it h comparative advantage. The countries decide to exchange 24 million pounds of grain for 24 million pounds of tea. This ratio of goods is known as the price of trade between Freedonia and Lamponia. The following graph shows the same PPF for Freedonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Freedonias consumption after trade. Note: Dashed drop lines will automatically extend to both axes Freedonia 64 16 Consumption After Trade 8 32 24 16 DE 16 24 32 40 4856 GRAIN (Millions of pounds) The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at point A As you did for Freedonia, place a black point (plus symbol) on the following graph to indicate Lamponias consimption after trade.
The following graph shows the same PPF for Lamponia as before, as well as its Initial consumption at point A. As you did for Freedonia, place a black point (plus symbol) on the following graph to Indicate Lamponias consumption after trade Lamponia 64 56 Consumption After Trade 48 40 16 24 32 40 460 GRAIN (MIlions of pounds True or False: Without consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) engaging in international trade, Freedonia and Lamponia would have been able to consume at the after-trade True False
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