When a country has a comparative advantage in the production of a good, it means that it can produce this good at a lowe

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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 Lowe 1 (103.45 KiB) Viewed 14 times

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 potatoes and coffee, each initially (i.e., before specialization and trade) producing 24 million pounds of potatoes and 12 million pounds of coffee, as indicated by the grey stars marked with the letter A. COFFEE (Millions of pounds) 64 56 48 40 64 32 24 16 8 0 0 PPF Freedonia 8 16 24 32 40 48 POTATOES (Millions of pounds) 56 64 Freedonia has a comparative advantage in the production of production of . Suppose comparative advantage. After specialization, the two countrie potatoes. (?) Freedonia Note: Dashed drop lines will automatically extend to both axes. COFFEE (Millions of pounds) 64 56 48 40 32 24 16 8 0 0 potatoes coffee PPF ‒‒‒ neither potatoes nor coffee Suppose that Freedonia and Desonia agree to trade. Each co advantage. The countries decide to exchange 16 million pour both potatoes and coffee of trade between Freedonia and Desonia. 8 " Desonia A 16 24 32 40 48 56 64 POTATOES (Millions of pounds) 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. ? ▼, while Desonia has a comparative advantage in the ecialize in the production of the goods in which each has a million pounds of coffee and million pounds of producing only the good in which it has a comparative pounds of coffee. This ratio of goods is known as the price (?)
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 Freedonia and Desonia. Both countries produce potatoes and coffee, each initially (i.e., before specialization and trade) producing 24 million pounds of potatoes and 12 million pounds of coffee, as indicated by the grey stars marked with the letter A. COFFEE (Millions of pounds) 64 56 48 40 64 32 24 16 8 0 0 PPF Freedonia 8 16 24 32 40 48 POTATOES (Millions of pounds) potatoes coffee neither potatoes nor coffee Suppose that advantage. Th of trade betw both potatoes and coffee Freedonia has a comparative advantage in the production of production of comparative a potatoes. 56 64 (?) Freedonia COFFEE (Millions of pounds) Note: Dashed drop lines will automatically extend to both axes. 64 56 48 40 32 24 16 8 0 0 PPF " Desonia A 8 16 24 32 40 48 56 POTATOES (Millions of pounds) , while Desonia has a comparative advantage in the . Suppose that Freedonia and Desonia specialize in the production of the goods in which each has a the two countries can produce a total of million pounds of coffee and million pounds of 64 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. (?) to trade. Each country focuses its resources on producing only the good in which it has a comparative e 16 million pounds of potatoes for 16 million pounds of coffee. This ratio of goods is known as the price ?
Note: Dashed drop lines will automatically extend to both axes. COFFEE (Millions of pounds) 64 56 35 COFFEE (Millions of pounds) 8 56 0 di 0 PPF 0 8 PPF The following graph shows the same PPF for Desonia as before, as well as its initial consumption at point A. True As you did for Freedonia, place a black point (plus symbol) on the following graph to indicate Desonia's consumption after trade. O False 16 8 | 1 24 32 40 48 POTATOES (Millions of pounds) Freedonia I 1 16 24 32 40 POTATOES (Millions of pounds) Desonia 56 48 64 56 Consumption After Trade 64 True or False: Without engaging in international trade, Freedonia and Desonia would not have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) + Consumption After Trade