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 itstrading 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 Sylvania. Both countries produce lemons and tee, eachinitially (e, before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of tea, as indicated by the grey starsmarked with the letter A.*564640375624164FPPFFreedonia has a comparative advantage in the production ofproduction ofY while Sylvania has a comparative advantage in theSuppose that Freedonia and Sylvania specialize in the production of the goods in which each has acomparative advantage. After specialization, the two countries can produce a total ofmillen pounds of tea andmillion pounds oflemons.$Suppose that Freedonia and Sylvania agree to trade. Each country focuses its resources on producing only the good in which it has a comparativeadvantage. The countries decide to exchange 24 million pounds of lemons for 24 million pounds of tea. This ratio of goods is known as the price oftrade between Freedonia and Sylvania.4The 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 thegraph to indicate Freedona's consumption after trade.Note: Dashed drep lines will automatically extend to beth axes.PPFB 162432404LEMONS (ons of pounds).FreedoniaPPF8FreedoniaO TrueO False21304048LEMONS (Mons of pound)?The following graph shows the same PPF for Sylvania as before, as well as its initial consumption at point AAs you did for Freedonia, place a black point (plus symbol) on the following graph to indicate Sylvania's consumption after trade.(?)Sylvania32401624LEMONS (Milions of pounds)24PPF14.64Sylvania42432 40 48 564LEMONS (Milions of pounds)•+Consumption After Trade(?)?+Consumption After TradeTrue or False: Without engaging in international trade, Freedonia and Sylvania would not have been able to consume at the after-trade consumptiepoints. (Hint: Base this question on the answers you previously entered on this page.)

If both countries have an absolute advantage, then also trade takes place due to the comparative…

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 specialice in the production of this good and trade it for other goods The following grachs show the production possibilities frontiers (PPFS) for Freedonia and Sylvania. Both countries produce lemons and tee, each intally tie, before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of tea, as indicated by the grey stars marked with the letter A TEA (Wtom of pende AVE&&RX Freedonia 142434 LEMONS (Ms of pounds (?) TEA (Mions of pounds UKR PPF Sylvania 40 43 LEMONS (Milices of pounds) ?

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 specialice in the production of this good and trade it for other goods The following grachs show the production possibilities frontiers (PPFS) for Freedonia and Sylvania. Both countries produce lemons and tee, each intally tie, before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of tea, as indicated by the grey stars marked with the letter A TEA (Wtom of pende AVE&&RX Freedonia 142434 LEMONS (Ms of pounds (?) TEA (Mions of pounds UKR PPF Sylvania 40 43 LEMONS (Milices of pounds) ?

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

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 Sylvania. Both countries produce lemons and tee, each
initially (e, before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of tea, as indicated by the grey stars
marked with the letter A.
*
56
46
40
37
56
24
16
4
F
PPF
Freedonia has a comparative advantage in the production of
production of
Y while Sylvania has a comparative advantage in the
Suppose that Freedonia and Sylvania specialize in the production of the goods in which each has a
comparative advantage. After specialization, the two countries can produce a total of
millen pounds of tea and
million pounds of
lemons.
$
Suppose that Freedonia 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 24 million pounds of lemons for 24 million pounds of tea. This ratio of goods is known as the price of
trade between Freedonia and Sylvania.
4
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 Freedona's consumption after trade.
Note: Dashed drep lines will automatically extend to beth axes.
PPF
B 162432404
LEMONS (ons of pounds)
.
Freedonia
PPF
8
Freedonia
O True
O False
21
30
40
48
LEMONS (Mons of pound)
?
The following graph shows the same PPF for Sylvania as before, as well as its initial consumption at point A
As you did for Freedonia, place a black point (plus symbol) on the following graph to indicate Sylvania's consumption after trade.
(?)
Sylvania
32
40
1624
LEMONS (Milions of pounds)
2
4
PPF
14
.
64
Sylvania
42432 40 48 564
LEMONS (Milions of pounds)
•+
Consumption After Trade
(?)
?
+
Consumption After Trade
True or False: Without engaging in international trade, Freedonia and Sylvania would not have been able to consume at the after-trade consumptie
points. (Hint: Base this question on the answers you previously entered on this page.)

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