Maldonia has a comparative advantage in the production of while Lamponia has a comparative advantage in the sugar . Suppose that Maldonia and Lamponia specialize in the production of the goods in which each has a 48 million pounds of production of grain comparative advantage. After specialization, the two countries can produce a total of 48 million pounds of sugar and grain. Suppose that Maldonia and Lamponia 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 grain for 24 million pounds of sugar. This ratio of goods is known as the price of trade between Maldonia and Lamponia.
Maldonia has a comparative advantage in the production of while Lamponia has a comparative advantage in the sugar . Suppose that Maldonia and Lamponia specialize in the production of the goods in which each has a 48 million pounds of production of grain comparative advantage. After specialization, the two countries can produce a total of 48 million pounds of sugar and grain. Suppose that Maldonia and Lamponia 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 grain for 24 million pounds of sugar. This ratio of goods is known as the price of trade between Maldonia and Lamponia.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter19: International Trade
Section: Chapter Questions
Problem 3QFR
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Are the numbers correct
Transcribed Image Text:16
16
8
8
8
16
24
32
40
48
56
64
8
16
24
32
40
48
56
64
GRAIN (Millions of pounds)
GRAIN (Millions of pounds)
Maldonia has a comparative advantage in the production of
sugar
while Lamponia has a comparative advantage in the
▼ . Suppose that Maldonia and Lamponia specialize in the production of the goods in which each has a
48 million pounds of
production of
grain
48 million pounds of sugar and
comparative advantage. After specialization, the two countries can produce a total of
grain.
Suppose that Maldonia and Lamponia 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 grain for 24 million pounds of sugar. This ratio of goods is known as the price of
trade between Maldonia and Lamponia.
The following graph shows the same PPF for Maldonia as before, as well as its initial consumption at point A. Place a black point (plus symbol) on the
graph to indicate Maldonia's consumption after trade.
Note: Dashed drop lines will automatically extend to both axes.
Maldonia
SUGAR (
SUGAR =
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 Maldonia and Lamponia. Both countries produce grain and sugar, each
initially (1.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of sugar, as indicated by the grey stars
marked with the letter A.
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Maldonia
Lamponia
64
64
56
56
48
PPF
48
40
40
32
32
24
24
PPF
16
16
--- -
8
8
0 8
16
24
32
40
48
56
64
16
24
32
40
48
56
64
GRAIN (Millions of pounds)
GRAIN (Millions of pounds)
Maldonia has a comparative advantage in the production of
sugar
while Lamponia has a comparative advantage in the
MacBook Air
SUGAR (Millions of pounds)
SUGAR (Millions of pounds)
本-
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