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 coffee, each initially (i.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of coffee, as indicated by the grey stars marked with the letter A.
Candonia has a comparative advantage in the production ofgrain,coffee,neither grain nor coffee,both grain and coffee, while Lamponia has a comparative advantage in the production ofgrain,coffee,neither grain nor coffee,both grain and coffee. Suppose that Candonia and Lamponia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of____millionpounds of grain and___ millionpounds of coffee.
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 8 million pounds of grain for 8 million pounds of coffee. This ratio of goods is known as theprice of tradebetween 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 Candonia's consumption after trade.
Note: Dashed drop lines will automatically extend to both axes.
Home X 3) Resour X 49 Mindt X AOLM X C Compu X @ New T. X Homev X C 45px X + ng.cengage.com/staticb/ui/evo/index.html? deploymentld=5981412353502464190243042516815BN=978035713357... Update CENGAGE | MINDTAP Q. Search this course 7 Module Two Quiz X 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. A-Z The following graphs show the production possibilities frontiers (PPF:) for Candonia and Lamponia, Both countries produce grain and coffee, each initially (I.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of coffee, as indicated by the grey stars marked with the letter A. Candonia Lamponia V graph of com and_png ECO-202-T1256 M..rip quix 2 question 2..png A quix 2_question 2..png A Show all X Type here to search O 10:48 PM 913/2021Home X 42 MindTo X AOLM X C Comp X 9 New To X Home. X C 45pe X + ng.cengage.com/staticb/ui/evo/index.html?deploymentld=59814123535024641902430425168ISBN=978035713357... Update CENGAGE | MINDTAP Q. Search this course Module Two Quiz X Candonia Lomponia A-Z PPF COFFEE (Millions of pounds) COFFEE (Milions of pounds) PPF 24 56 M N 56 GRAIN (Millions of pounds) GRAIN (Millions of pounds) V graph of com and png ECO-202-T1256 M.. sip quix 2 question 2.._ping A quix 2_question 2. png A Show all X Type here to search O 1 1:00 PM W11/2021Home X 1) Rejour X Mindh X ADLM X C Compa X New 4 X Home X C 4 5p X + ) C ng cengage.com/staticb/ui/evo/index.html?deploymentld=59814123535024641902430425168@ISBN=978035713357.. # Update CENGAGE | MINDTAP Q. Search this course Module Two Quiz O X Candonia has a comparative advantage in the production of , while Lamponia has a comparative advantage in the production of . Suppose that Candonia and Lamponia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of million pounds of grain and million pounds of coffee. A-Z 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 8 million pounds of grain for 8 million pounds of coffee. 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 Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. V graph of corn and. ping ECO-202-T1256 M.zip quiz 2_question 2-png quiz 2_question 2-.png A Show all Type here to search O 1 1:01 PM 911/2021Home X (B) Resour X " Mindla X AOLM X C Compe x 3 New To X Homey X C 4 Spec X + C Ing.cengage.com/staticb/ui/evo/index.html?deploymentld=598141235350246419024304251680ISBN=978035713357... Update CENGAGE |MINDTAP Q. Search this course Module Two Quiz O X 64 Consumption After Trade A-7 O O COFFEE (Millions of pounds) 24 PPF (? 24 32 56 GRAIN (Millions of pounds] V Type here to search O 11:03 PM 911/2021Home X Mindla X AOLM X C Compa X @ New To X Home. X C 4 Spec X + - C ng.cengage.com/staticb/ui/evo/index.html?deploymentld=59814123535024641902430425168.ISBN=978035713357... Update CENGAGE |MINDTAP Q. Search this course Module Two Quiz O X 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 indicate Lamponia's consumption after trade. A-Z Lamponla .+ Study Hub Consumption After Trade PPF dlions of pounds) Type here to search O O A 1 1:04 PM 911/2021Home * (1) Retour x " Minds x AOLM X C Comps X New 1: X HomeY X C A Spec * + X C Ing.cengage.com/staticb/vi/evo/index.html?deploymentld=59814123535024641902430425168ISBN=978035713357... # Update CENGAGE | MINDTAP Q. Search this course Module Two Quiz X 56 Consumption After Trade 48 PPF A-Z 40 COFFEE (Millions of pounds] 16 24 12 GRAIN (Millions of pounds) Type here to search O O 1 1:08 PM A W/11/2021Home X 4 Mindl X AOLM X C Comp X 9 New To X 3 Homer X C 4 5px X + O ng.cengage.com/staticb/ui/evo/index.html? deploymentld=5981412353502464190243042516815BN=978035713357... Update CENGAGE | MINDTAP Q. Search this course 7 Module Two Quiz X COFFEE U.Lions A-Z 14 GRAIN (Millions of pounds) True or False: Without engaging in international trade, Candonia and Lamponia would not have been able to consume at the after-trade consumption bundles, (Hint: Base this question on the answers you previously entered on this page.) Q True O False Type here to search O O 11:09 PM A Meet Now 9/13/2021
