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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 lemons and coffee, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of coffee, as indicated by the grey stars marked with the letter A. Freedonia Desnnia _ e4 _ _ 56 _ '51\" '6)\" E + E 48 PF'F :u' 3 f} 40 3 4o D D 2 E .2 32 2 32 E E m 2\" Lu 24 E E "- 16 \" 16 O O A 0 0 B B I I] I] U 8 1B 24 32 4D 48 56 64 0 3 16 24 32 40 43 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) Freedonia has a comparative advantage in the production of V , while Desonia has a comparative advantage in the production of V . 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 ofE million pounds of lemons and E 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 16 million pounds of lemons for 16 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. Freedonia 64 56 Consumption After Trade 48 40 COFFEE (Millions of pounds) 32 24 PPF 16 A CO 0 8 16 24 32 40 48 56 64 LEMONS (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 Freedonia, place a black point { plus symbol) on the following graph to indicate Desonia's consumption after trade. 6') Desonia Consumption After Trade 45' PPF 32 24- COFFEE (Millions of pounds) 16- 0 8 1B 24 32 41] 48 56 64 LEMONS (Millions of pounds) True or False: Without engaging in international trade' Freedonia and Desonia would have been able to consume at the aftertrade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) 0 True 0 False