hfkjhd sfjfhwehfnqkefjlmw;i$,$q;xSpecialization 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 Yosemite and Congaree. Both countries produce peas and basil, each initially

$($i$.$e$.,$ before specialization and trade$)$ producing $36$ million pounds of peas and $18$ million pounds of basil, as indicated by the grey stars marked with

the letter $A.$

Yosemite has a comparative advantage in the production ofYosemite has a comparative advantage in the production of

peas

$,$ while Congaree has a comparative advantage in the

production of

$.$ Suppose that Yosemite 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 $60$ million pounds of peas and $,36$ million pounds of

basil.

Suppose that Yosemite 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 $24$ million pounds of peas for $24$ million pounds of basil. This ratio of goods is known as the price of

trade between Yosemite and Congaree.

The following graph shows the same PPF for Yosemite as before, as well as its initial consumption at point A$.$ Place a black point $($plus symbol$)$ on the

graph to indicate Yosemite's consumption after trade.

Note: Dashed drop lines will automatically extend to both axes.The following graph shows the same PPF for Yosemite as before, as well as its initial consumption at point A$.$ Place a black point $($plus symbol$)$ on the

graph to indicate Yosemite's consumption after trade.

Note: Dashed drop lines will automatically extend to both axes.

Yosemite

The following graph shows the same PPF for Congaree as before, as well as its initial consumption at point A$.$

As you did for Yosemite, place a black point $($plus symbol$)$ on the following graph to indicate Congaree's consumption after trade.As you did for Yosemite, place a black point $($plus symbol$)$ on the following graph to indicate Congaree's consumption after trade.

Congaree

True or False: Without engaging in international trade, Yosemite 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.$)$

True

False