When a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFs) for Candonia and Desonia. Both countries produce grain and sugar, each initially (that is, before specialization and trade) producing 18 million pounds of grain and 9 million pounds of sugar, as indicated by grey points (star symbols) labeled point A. Candonia Desonia 48 48 42 42 7'? 36 - "'7 36 E E o o e- 30 - n- 30 o "6 to tn 5 24 8 24 E = v 18 g 18 o: o: 5 5 3 12 :a 12 co 0: 6 6 0 l l 0 l l | l o s 12 18 24 30 36 42 48 30 36 42 48 GRAIN (Millions of pounds) GRAIN (Millions of pounds) Candonia has a comparative advantage in the production of production of v V , while Desonia has a comparative advantage in the . If each fully specializes (that is, produces only the good for which each has a comparative advantage), the most the two countries can produce is million pounds of grain and million pounds of sugar. Suppose that Candonia and Desonia specialize and open up to international trade, and the terms of trade in the world market are 1 pound of grain for 1 pound of sugar. That is, Candonia is willing to sell Desonia 1 pound of grain in exchange for 1 pound of sugar, and Desonia is willing to sell Candonia 1 pound of sugar in exchange for 1 pound of grain. The countries decide to exchange 12 million pounds of grain for 12 million pounds of sugar. The following graph shows the same PPF for Candonia as before, as well as its initial consumption at point A. Use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Candonia. Then place the black paint (plus symbol) on the trading possibilities line to indicate Candonia's consumption alter specialization and trade. Candonia 48 A 42 TPL 36 30 Consumption After Trade 24 SUGAR (Millions of pounds) 18 PPF 12 6 0 30 36 42 48 6 12 18 24 GRAIN (Millions of pounds)Desonia 48 A 42 TPL 36 PPF -+ 30 Consumption After Trade 24 SUGAR (Millions of pounds) 18 12 6 0 6 12 18 24 30 36 42 48 GRAIN (Millions of pounds)