1. Specialization and trade A country may specialize in the production of a good that it can produce at a lower opportunity cost than its trading partners. Because of this comparative advantage, countries benet when they specialize and trade with each other. The following graphs show the production possibilities curves (PPCs) for Freedonia and Lamponia. Both countries produce grain and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. Freedonia Lamponia 64 64 __ 56 56 __ g 48 PPC g 48 5 s o o 2- 40 3 4O o o g 32 g 32 .9 2 s E v 24 v 24 PP a e G