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 Shenandoah and Rainier. Both countries produce peas and lentils, each initially (i.e., before specialization and trade) producing 18 million pounds of peas and 9 million pounds of lentils, as indicated by the grey stars marked with the letter A. LENTILS (Millions of pounds) peas. 48 42 36 PPF 30 24 18 12 6 0 0 + 6 Shenandoah 12 18 24 30 36 PEAS (Millions of pounds) 42 48 LENTILS (Millions of pounds) 48 42 36 30 24 18 PPF 12 6 0 + 0 6 Rainier 12 18 24 30 36 PEAS (Millions of pounds) 42 48 , while Rainier has a comparative advantage in the Shenandoah has a comparative advantage in the production of production of . Suppose that Shenandoah and Rainier 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 lentils and million pounds of Suppose that Shenandoah and Rainier 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 6 million pounds of peas for 6 million pounds of lentils. This ratio of goods is known as the price of trade between Shenandoah and Rainier. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Shenandoah's consumption after trade.
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 Shenandoah and Rainier. Both countries produce peas and lentils, each initially (i.e., before specialization and trade) producing 18 million pounds of peas and 9 million pounds of lentils, as indicated by the grey stars marked with the letter A. LENTILS (Millions of pounds) peas. 48 42 36 PPF 30 24 18 12 6 0 0 + 6 Shenandoah 12 18 24 30 36 PEAS (Millions of pounds) 42 48 LENTILS (Millions of pounds) 48 42 36 30 24 18 PPF 12 6 0 + 0 6 Rainier 12 18 24 30 36 PEAS (Millions of pounds) 42 48 , while Rainier has a comparative advantage in the Shenandoah has a comparative advantage in the production of production of . Suppose that Shenandoah and Rainier 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 lentils and million pounds of Suppose that Shenandoah and Rainier 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 6 million pounds of peas for 6 million pounds of lentils. This ratio of goods is known as the price of trade between Shenandoah and Rainier. The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Shenandoah's consumption after trade.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains Rrom Trade
Section: Chapter Questions
Problem 6PA
Related questions
Question
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
Transcribed Image Text: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 Shenandoah and Rainier. Both countries produce peas and lentils, each
initially (i.e., before specialization and trade) producing 18 million pounds of peas and 9 million pounds of lentils, as indicated by the grey stars
marked with the letter A.
LENTILS (Millions of pounds)
peas.
48
42
36
30
24
18
12
6
0
0
PPF
6
Shenandoah
12 18 24 30
36
PEAS (Millions of pounds)
42 48
LENTILS (Millions of pounds)
48
42
Note: Dashed drop lines will automatically extend to both axes.
36
30
24
18
12
6
0
0
PPF
6
Rainier
12
18 24 30 36
PEAS (Millions of pounds)
Shenandoah has a comparative advantage in the production of
while Rainier has a comparative advantage in the
production of
. Suppose that Shenandoah and Rainier 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 lentils and
million pounds of
42 48
Suppose that Shenandoah and Rainier 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 6 million pounds of peas for 6 million pounds of lentils. This ratio of goods is known as the price of
trade between Shenandoah and Rainier.
The following graph shows the same PPF for Shenandoah as before, as well as its initial consumption at point A. Place a black point (plus symbol) on
the graph to indicate Shenandoah's consumption after trade.
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!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 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
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours…
Economics
ISBN:
9781337091985
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:
9781285165912
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:
9781305971493
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning