(?)(?FreedoniaDesonia646456564848PPF4040323224PPF241616A88816243240485664816243240485664LEMONS (Millions of pounds)LEMONS (Millions of pounds)Freedonia has a comparative advantage in the production ofwhile Desonia has a comparative advantage in theproduction ofSuppose that Freedonia and Desonia specialize in the production of the goods in which each has acomparative advantage. After specialization, the two countries can produce a total ofmillion pounds of lemons andmillion pounds oftea.Suppose that Freedonia and Desonia agree to trade. Each country focuses its resources on producing only the good in which it has a comparativeadvantage. The countries decide to exchange 8 million pounds of lemons for 8 million pounds of tea. This ratio of goods is known as the price oftrade between Freedonia and Desonia.TEA (Millions of pounds)TEA (Millions of pounds) Suppose that Freedonia and Desonia agree to trade. Each country focuses its resources on producing only the good in which it has a comparativeadvantage. The countries decide to exchange 8 million pounds of lemons for 8 million pounds of tea. This ratio of goods is known as the price oftrade between Freedonia and Desonia.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 thegraph to indicate Freedonia's consumption after trade.Note: Dashed drop lines will automatically extend to both axes.(2Freedonia6456Consumption After Trade48403224PPF16A8816243240485664LEMONS (Millions of pounds)TEA (Millions of pounds)

Comparative advantage is when a nation is able to produce a particular product at a lower…

(? Freedonia Desonia 64 64 56 56 48 48 PPF 40 40 32 32 24 PPF 24 16 16 --- -- - -- 8 0 8 16 24 32 40 48 56 64 8 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) Freedonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of Suppose that Freedonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of million pounds of lemons and million pounds of tea. TEA (Millions of pounds) TEA (Millions of pounds)

(? Freedonia Desonia 64 64 56 56 48 48 PPF 40 40 32 32 24 PPF 24 16 16 --- -- - -- 8 0 8 16 24 32 40 48 56 64 8 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) Freedonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of Suppose that Freedonia and Desonia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of million pounds of lemons and million pounds of tea. TEA (Millions of pounds) TEA (Millions of pounds)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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