Candonia has a comparative advantage in the production of tea , while Sylvania has a comparative advantage in the production of potatoes . Suppose that Candonia and Sylvania specialize in the production of the goods in which each has a 24 million pounds of tea and 24 million pounds of comparative advantage. After specialization, the two countries can produce a total of potatoes. Suppose that Candonia and Sylvania 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 4 million pounds of potatoes for 4 million pounds of tea. This ratio of goods is known as the price of trade between Candonia and Sylvania. The following graph shows the same PPF for Candonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes.

Candonia has a comparative advantage in the production of tea , while Sylvania has a comparative advantage in the production of potatoes . Suppose that Candonia and Sylvania specialize in the production of the goods in which each has a 24 million pounds of tea and 24 million pounds of comparative advantage. After specialization, the two countries can produce a total of potatoes. Suppose that Candonia and Sylvania 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 4 million pounds of potatoes for 4 million pounds of tea. This ratio of goods is known as the price of trade between Candonia and Sylvania. The following graph shows the same PPF for Candonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes.

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 1CQQ

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