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 Freedonia and Desonia. Both countries produce lemons and tea, each initially (that is, before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of tea, as indicated by grey points (star symbols) labeled point A Freedonia has a comparative advantage in the production of while Desonia has a comparative advantage in the production of. 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 lemons and million pounds of tea. Suppose that Freedonia and Desonia specialize and open up to international trade, and the terms of trade in the world market are 1 pound of lemons for 1 pound of tea. That is, Freedonia is willing to sell Desomia 1 pound of lemons im exchange for 1 pound of tea, and Desonia is willing to sell Freedonia 1 pound of tea in exchange for 1 pound of lemons The countries decide to exchange 8 million pounds of lemon for 8 million pounds of tea. Tips ips 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 Freedonia and Desonia. Both countries produce lemons and tea, each initially (that is, before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of tea, as indicated by grey points (star symbols) labeled point A. TEA (Millions of pounds) 32 16 3. 56 48 40 8 24 PPF (?) A Freedonia TEA (Millions of pounds) 64 56 48 40 32 24 16 8 PPF Desonia 0 0 0 B 16 24 32 40 48 56 64 0 B 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) (?)