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 Congaree. Both countries produce corn and pistachios, each initially (i.e., before specialization and trade) producing 18 million pounds of corn and 9 million pounds of pistachios, as indicated by the grey stars marked with the letter A. PISTACHIOS (Millions of pounds) 48 42 36 30 24 Shenandoah 18 PPF 18,9 12 6 ? PISTACHIOS (Millions of pounds) 48 42 36 30 24 PPF 18 18,9 12 6 Congaree 0 + H 0 0 6 12 18 24 30 36 42 48 0 6 12 18 24 30 36 42 . 48 CORN (Millions of pounds) CORN (Millions of pounds) (?) Shenandoah has a comparative advantage in the production of the production of while Congaree has a comparative advantage in . Suppose that Shenandoah and Congaree specialize in the production of the goods in which each million pounds of corn and million pounds has a comparative advantage. After specialization, the two countries can produce a total of of pistachios. Suppose that Shenandoah and Congaree 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 corn for 6 million pounds of pistachios. This ratio of goods is known as the price of trade between Shenandoah and Congaree. 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. Note: Dashed drop lines will automatically extend to both axes. illions of pounds) 48 122 42 36 30 Shenandoah Consumption After Trade ? Cancer Create
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 Congaree. Both countries produce corn and pistachios, each initially (i.e., before specialization and trade) producing 18 million pounds of corn and 9 million pounds of pistachios, as indicated by the grey stars marked with the letter A. PISTACHIOS (Millions of pounds) 48 42 36 30 24 Shenandoah 18 PPF 18,9 12 6 ? PISTACHIOS (Millions of pounds) 48 42 36 30 24 PPF 18 18,9 12 6 Congaree 0 + H 0 0 6 12 18 24 30 36 42 48 0 6 12 18 24 30 36 42 . 48 CORN (Millions of pounds) CORN (Millions of pounds) (?) Shenandoah has a comparative advantage in the production of the production of while Congaree has a comparative advantage in . Suppose that Shenandoah and Congaree specialize in the production of the goods in which each million pounds of corn and million pounds has a comparative advantage. After specialization, the two countries can produce a total of of pistachios. Suppose that Shenandoah and Congaree 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 corn for 6 million pounds of pistachios. This ratio of goods is known as the price of trade between Shenandoah and Congaree. 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. Note: Dashed drop lines will automatically extend to both axes. illions of pounds) 48 122 42 36 30 Shenandoah Consumption After Trade ? Cancer Create
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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 Congaree. Both countries produce corn and pistachios,
each initially (i.e., before specialization and trade) producing 18 million pounds of corn and 9 million pounds of pistachios, as indicated by the grey
stars marked with the letter A.
PISTACHIOS (Millions of pounds)
48
42
36
30
24
Shenandoah
18
PPF
18,9
12
6
?
PISTACHIOS (Millions of pounds)
48
42
36
30
24
PPF
18
18,9
12
6
Congaree
0
+
H
0
0
6
12
18
24
30 36
42
48
0
6
12
18
24
30
36
42
.
48
CORN (Millions of pounds)
CORN (Millions of pounds)
(?)
Transcribed Image Text:Shenandoah has a comparative advantage in the production of
the production of
while Congaree has a comparative advantage in
. Suppose that Shenandoah and Congaree specialize in the production of the goods in which each
million pounds of corn and
million pounds
has a comparative advantage. After specialization, the two countries can produce a total of
of pistachios.
Suppose that Shenandoah and Congaree 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 corn for 6 million pounds of pistachios. This ratio of goods is known as the price of
trade between Shenandoah and Congaree.
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.
Note: Dashed drop lines will automatically extend to both axes.
illions of pounds)
48
122
42
36
30
Shenandoah
Consumption After Trade
?
Cancer
Create
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