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 Lamponia. Both countries produce lemons and sugar, each initially (that is, before specialization and trade) producing 12 million pounds of lemons and 6 million pounds of sugar, as indicated by grey points (star symbols) labeled point A 32 28 24 Freedonia has a comparative advantage in the production of production of 201 16 advantage), the most the two countries can produce is 12 16 B 12 32 4 0 28 0 24 D PPF Suppose that Freedonia and Lamponia 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 sugar. That is, Lamponia is willing to sell Freedonia 1 pound of lemons in exchange for 1 pound of sugar, and Freedonia is willing to sell Lamponia 1 pound of sugar in exchange for 1 pound of lemons. The countries decide to exchange 4 million pounds of lemons for 4 milion pounds of sugar PPF 4 The following graph shows the same PPF for Freedonia as before, as well as its initial consumption at point A Use the green fine (triangle symbol) to plot the trading possibilities line (TPL) for Freedonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Freedonia's consumption after specialization and trade. Note: Dashed drop ines will automatically extend to both aves. True Freedonia PPF O False 12 16 20 24 28 32 4 LEMONS (Mons of pounds) 8 Freedonia I 12 14 20 24 LEMONS (Mons of pounds) The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at paint A "₂" As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Lamponia. Then place the black point (plus. symbol) on the trading possibilities line to indicate Lamponla's consumption after specialization and trade. (?) Lamponia 12 16 20 24 LEMONS (Milions of pounds) (spunedo su uon 20 16 12 PPF 23 Y while Lamponia has a comparative advantage in the If each fully specializes (that is, produces only the good for which each has a comparative million pounds of sugar and million pounds of lemons. 4 32 TPL Lamponia TY" 12 16 20 24 28 LEMONS (Mions of pounds) + Consumption After Trade TPL ? (?) +*+ Consumption After Trade True or False: Without engaging in International trade, Freedonia and Lamporia would not have been able to consume at the after-trade consumption bundles. (Hint: Base your answer to this question on the answers you previously entered on this page.)
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 Lamponia. Both countries produce lemons and sugar, each initially (that is, before specialization and trade) producing 12 million pounds of lemons and 6 million pounds of sugar, as indicated by grey points (star symbols) labeled point A 32 28 24 Freedonia has a comparative advantage in the production of production of 201 16 advantage), the most the two countries can produce is 12 16 B 12 32 4 0 28 0 24 D PPF Suppose that Freedonia and Lamponia 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 sugar. That is, Lamponia is willing to sell Freedonia 1 pound of lemons in exchange for 1 pound of sugar, and Freedonia is willing to sell Lamponia 1 pound of sugar in exchange for 1 pound of lemons. The countries decide to exchange 4 million pounds of lemons for 4 milion pounds of sugar PPF 4 The following graph shows the same PPF for Freedonia as before, as well as its initial consumption at point A Use the green fine (triangle symbol) to plot the trading possibilities line (TPL) for Freedonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Freedonia's consumption after specialization and trade. Note: Dashed drop ines will automatically extend to both aves. True Freedonia PPF O False 12 16 20 24 28 32 4 LEMONS (Mons of pounds) 8 Freedonia I 12 14 20 24 LEMONS (Mons of pounds) The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at paint A "₂" As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Lamponia. Then place the black point (plus. symbol) on the trading possibilities line to indicate Lamponla's consumption after specialization and trade. (?) Lamponia 12 16 20 24 LEMONS (Milions of pounds) (spunedo su uon 20 16 12 PPF 23 Y while Lamponia has a comparative advantage in the If each fully specializes (that is, produces only the good for which each has a comparative million pounds of sugar and million pounds of lemons. 4 32 TPL Lamponia TY" 12 16 20 24 28 LEMONS (Mions of pounds) + Consumption After Trade TPL ? (?) +*+ Consumption After Trade True or False: Without engaging in International trade, Freedonia and Lamporia would not have been able to consume at the after-trade consumption bundles. (Hint: Base your answer to this question on the answers you previously entered on this page.)
Chapter20: International Trade
Section: Chapter Questions
Problem 11QP
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Question
Transcribed Image Text: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 Lamponia. Both countries produce lemons and sugar, each
initially (that is, before specialization and trade) producing 12 million pounds of lemons and 6 million pounds of sugar, as indicated by grey points (star
symbols) labeled point A.
12
28
24
12
Freedonia has a comparative advantage in the production of
production of
B
(spuned to cons
4
24
advantage), the most the two countries can produce is
0
20
12
16
28
O
12
8
Note: Dashed drop lines will automatically extend to both axes.
20
0
0
PPF
24 PPF
4
Suppose that Freedonia and Lamponia 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 sugar. That is, Lamponia is willing to sell Freedonia 1 pound of lemons in exchange for 1 pound of sugar, and Freedonia is willing to sell
Lamponia 1 pound of sugar in exchange for 1 pound of lemons. The countries decide to exchange 4 million pounds of lemons for 4 million pounds of
sugar.
The following graph shows the same PPF for Freedonia as before, as well as its initial consumption at point A Use the green line (triangle symbol) to
plot the trading possibilities line (TPL) for Freedonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Freedonia's
consumption after specialization and trade.
Freedonia
12 16 20 24 28 32
PPF
LEMONS (Millions of pounds)
4
O True
O False
8
Freedonia
12 14 20
LEMONS (Ms of pounds)
Lamponia
12 16 20
LEMONS (Millions of pounds)
?
24
The following graph shows the same PPF for Lamponia as before, as well as its initial consumption at point A
20
As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Lamponia. Then place the black point (plus)
symbol) on the trading possibilities line to indicate Lampenia's consumption after specialization and trade.
(?)
UGAR (MIions of pounds)
24
28
while Lampania has a comparative advantage in the
If each fully specializes (that is, produces only the good for which each has a comparative
million pounds of sugar and
million pounds of lemons.
12
23
D
0
32
PPF
4 12 16 20 24 28 32
.
LEMONS (Millions of pounds)
TPL
|+s4
Lamponia
Consumption After Trade
(?)
TPL
**
Consumption After Trade
True or False: Without engaging in International trade, Freedonia and Lamporia would not have been able to consume at the after-trade consumption
bundles. (Hint: Base your answer to this question on the answers you previously entered on this page.)
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