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 Maldonia and Lamponia. Both countries produce potatoes and sugar, each initially (I.e., before specialization and trade) producing 12 million pounds of potatoes and 6 million pounds of sugar, as indicated by the grey stars marked with the letter A. ? Maldonla Lamponia 32 28 SUGAR (Millions of pounds) 24 30 16 PPF SUGAR (Millions of pounds) 32 28 24 20 16 12 n 12,6 PPF 0 0 4 0 4 8 12 16 20 24 28 8 12 16 20 24 28 32 POTATOES (Millions of pounds) 32 POTATOES (Millions of pounds) while Lamponia has a comparative advantage in the Maldonia has a comparative advantage in the production of production of Suppose that Maldonia and Lamponia 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 sugar and million pounds of potatoes.
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 Maldonia and Lamponia. Both countries produce potatoes and sugar, each initially (I.e., before specialization and trade) producing 12 million pounds of potatoes and 6 million pounds of sugar, as indicated by the grey stars marked with the letter A. ? Maldonla Lamponia 32 28 SUGAR (Millions of pounds) 24 30 16 PPF SUGAR (Millions of pounds) 32 28 24 20 16 12 n 12,6 PPF 0 0 4 0 4 8 12 16 20 24 28 8 12 16 20 24 28 32 POTATOES (Millions of pounds) 32 POTATOES (Millions of pounds) while Lamponia has a comparative advantage in the Maldonia has a comparative advantage in the production of production of Suppose that Maldonia and Lamponia 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 sugar and million pounds of potatoes.
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
Problem 5PA
Related questions
Question
Practice Pack
A10
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Includes step-by-step video
Trending now
This is a popular solution!
Learn your way
Includes step-by-step video
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781305971509
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781305971509
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781285165912
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning