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 Rainier. Both countries produce corn and pistachios, each initially (i.e., before specialization and trade) producing 30 million pounds of corn and 15 million pounds of pistachios, as indicated by the grey stars marked with the letter A.Shenandoah Rainier 80 80 70 70 60 PPF 80 50 50 40 40 PISTACHIOS (Millions of pounds) PISTACHIOS (Millions of pounds) 30 30 PPF 20 20 A A 10 10 0 10 20 30 40 50 60 70 80 10 20 30 40 50 60 70 80 CORN (Millions of pounds) CORN (Millions of pounds)Shenandoah has a comparative advantage in the production of , while Rainier has a comparative advantage in the production of . Suppose that Shenandoah and Rainier 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 pistachios and million pounds of corn. Suppose that Shenandoah and Rainier 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 20 million pounds of corn for 20 million pounds of pistachios. This ratio of goods is known as the price of trade between Shenandoah and Rainier. 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 80 70 Consumption After Trade 60 PPF 50 PISTACHIOS (Millions of pounds) 40 30 20 A 10 10 20 30 40 50 60 70 80 CORN (Millions of pounds)The following graph shows the same PPF for Rainier as before, as well as its initial consumption at point A. As you did for Shenandoah, place a black point {plus symbol} on the foliowing graph to indicate Ral'nl'er's consumption after trade. Rainier 80 70 Consumption After Trade 60 50 40 PISTACHIOS (Millions of pounds) 30 PPF 20 A 10 10 20 30 40 50 60 70 80 CORN (Millions of pounds)True or False: Without engaging in international trade, Shenandoah and Rainier 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