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Question: when a country has a comparative advantage in the production...

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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 Freedonia and Sylvania. Both countries produce grain and coffee, each initially (i.e., before specialization and trade) producing 12 million pounds of grain and 6 million pounds of coffee, as indicated by the grey stars marked with the letter A.

Freedonia Sylvania 32 32 28 PPF 16 16 12 12 PF 0 4 8116 20 24 2832 0 4 8116 20 24 2832 GRAIN (Millions of pounds) GRAIN (Millions of pounds) Freedonia has a comparative advantage in the production of production of comparative advantage. After specialization, the two countri grain ,while Sylvania has a comparative advantage in the ecialize in the production of the goods in which each has a Suppose that grain million pounds of coffee and million pounds of coffee neither grain nor coffee Suppose that Freedonia and Sylvania agree to trade. Each c advantage. The countries decide to exchange 4 million pound both grain and coffee nds of coffee. This ratio of goods is known as the price of trade between Freedonia and Sylvania on producing only the good in which it has a comparative

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 32 28 Consumption After Trade 24 PPF 20 16 12 0 4 6 2 24 28 32 GRAIN (Millions of pounds) The following graph shows the same PPF for Sylvania 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 Sylvanias consumption after trade. Sylvania 32 28 Consumption After Trade 16 W 12 PPF 0 48 1220 24 28 32 GRAIN (Millions of pounds) True or False: Without engaging in international trade, Freedonia and Sylvania would have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) True O False

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