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Suppose that Candonia and Lamponia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Candonia has a comparative advantage in the production of sugar. The countries decide to exchange 12 million pounds of grain for 12 million pounds of sugar. This ratio of goods is known as the terms of trade between Candonia and Lamponia. The following graph shows the PPF for Candonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. SUGAR (Millions of pounds) 32 28 24 20 16 12 4 0 0 PPF 4 8 Candonia 16 20 12 GRAIN (Millions of pounds) After trade, Candonia consumes 24 28 32 million pounds of grain as well as Consumption After Trade ? million pounds of sugar.

Suppose that Candonia and Lamponia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Candonia has a comparative advantage in the production of sugar. The countries decide to exchange 12 million pounds of grain for 12 million pounds of sugar. This ratio of goods is known as the terms of trade between Candonia and Lamponia. The following graph shows the PPF for Candonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. SUGAR (Millions of pounds) 32 28 24 20 16 12 4 0 0 PPF 4 8 Candonia 16 20 12 GRAIN (Millions of pounds) After trade, Candonia consumes 24 28 32 million pounds of grain as well as Consumption After Trade ? million pounds of sugar.

Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains Rrom Trade
Section: Chapter Questions
Problem 3CQQ
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Suppose that Candonia and Lamponia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Candonia has a comparative advantage in the production of sugar. The countries decide to exchange 12 million pounds of grain for 12 million pounds of sugar. This ratio of goods is known as the terms of trade between Candonia and Lamponia. The following graph shows the PPF for Candonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. SUGAR (Millions of pounds) 32 28 24 20 16 12 4 0 0 PPF 17 4 8 Candonia 16 20 12 GRAIN (Millions of pounds) After trade, Candonia consumes 24 28 32 million pounds of grain as well as Consumption After Trade ? million pounds of sugar.
Transcribed Image Text:Suppose that Candonia and Lamponia agree to trade. Each country focuses its resources on producing only the good in which it has a comparative advantage. Candonia has a comparative advantage in the production of sugar. The countries decide to exchange 12 million pounds of grain for 12 million pounds of sugar. This ratio of goods is known as the terms of trade between Candonia and Lamponia. The following graph shows the PPF for Candonia, as well as its initial consumption at point A. Place a black point (cross symbol) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. SUGAR (Millions of pounds) 32 28 24 20 16 12 4 0 0 PPF 17 4 8 Candonia 16 20 12 GRAIN (Millions of pounds) After trade, Candonia consumes 24 28 32 million pounds of grain as well as Consumption After Trade ? million pounds of sugar.
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