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 Freedonia and Desonia. Both countries produce grain and coffee, each initially (i.e., before specialization and trade) producing 18 million pounds of grain and 9 million pounds of coffee, as indicated by the grey stars marked with the letter A. (? (?) Freedonia Desonia 18 48 PPF COFFEE (Millions of pounds) 24 COFFEE (Millions of pounds) PPF 18 N S A o 12 18 24 30 36 42 48 12 18 24 30 36 42 48 GRAIN (Millions of pounds) GRAIN (Millions of pounds) Freedonia has a comparative advantage in the production of grain , while Desonia has a comparative advantage in the production of coffee . Suppose that Freedonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of 36 million pounds of grain and 36 million pounds of coffee. Suppose that Freedonia and Desonia 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 12 million pounds of grain for 12 million pounds of coffee. This ratio of goods is known as the price of trade between Freedonia and Desonia. 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 Freedonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes.Consumpiion After Trade COFFEE {Millions of pounds) 12 18 24 so as 42 GRAIN (Millions of pounds) The following graph shows the same PPF for Desonia as before, as well as its initial consumption at point A. As you did for Freedom'a, place a black paint (plus symbol) on the following graph to indicate Desom'a's consumption after trade. Consumption After Trade 13 'U c :I O a. "6 m c _Q S v LLI Lu LL u. 0 U l 18 24 30 36 42 GRAIN (Millions of pounds) True or False: Without engaging in international trade, Freedonia and Desonia 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.) 0 True 0 False