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 Shenandoah and Congaree. Both countries produce corn and pistachios, each initially (i.e., before specialization and trade) producing 36 million pounds of corn and 18 million pounds of pistachios, as indicated by the grey stars marked with the letter A. (?) Shenandoah Congaree 96 84 84 PPF PISTACHIOS (Millions of pounds) PISTACHIOS (Millions of pounds) PPF 24 24 12 12 0 12 24 36 48 60 1 72 84 96 12 24 36 48 60 72 84 96 CORN (Millions of pounds) CORN (Millions of pounds) Shenandoah has a comparative advantage in the production of 7 , while Congaree has a comparative advantage in the production of . Suppose that Shenandoah and Congaree 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 corn and million pounds of pistachios.Suppose that Shenandoah and Congaree 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 36 million pounds of corn for 36 million pounds of pistachios. This ratio of goods is known as the price of trade between Shenandoah and Congaree. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Shenandoah's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. (?) Shenandoah 96 -+ 84 Consumption After Trade 72 80 48 PISTACHIOS ( Millions of pounds) 36 PPP 24 12 12 24 38 48 60 72 84 98 CORN (Millions of pounds) The following graph shows the same PPF for Congaree as before, as well as its initial consumption at point A.As you did for Shenandoah, place a black point (plus symbol) on the following graph to indicate Congaree's consumption after trade. Congaree 98 84 Consumption After Trade 72 PPF 48 PISTACHIOS ( Millions of pounds) 24 A 12 12 24 38 48 60 72 84 98 CORN (Millions of pounds) True or False: Without engaging in international trade, Shenandoah and Congaree 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.) O True O False