Freedonia has a comparative advantage in the production of (grain, tea, neither grain nor tea, both grain and tea), while Desonia has a comparative advantage in the production of (grain, tea, neither grain nor tea, both grain and tea). If each fully specializes that is, produces only the good for which each has a comparative advantage, the most the two countries can produce is ( )million pounds of grain and ( )million pounds of tea. As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Desonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Desonia’s consumption after specialization and trade. True or False: Without engaging in international trade, Freedonia and Desonia 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.) a) True b) False
Freedonia has a comparative advantage in the production of (grain, tea, neither grain nor tea, both grain and tea), while Desonia has a comparative advantage in the production of (grain, tea, neither grain nor tea, both grain and tea). If each fully specializes that is, produces only the good for which each has a comparative advantage, the most the two countries can produce is ( )million pounds of grain and ( )million pounds of tea. As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Desonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Desonia’s consumption after specialization and trade. True or False: Without engaging in international trade, Freedonia and Desonia 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.) a) True b) False
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter19: International Trade
Section: Chapter Questions
Problem 3QFR
Related questions
Question
Freedonia has a
As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Desonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Desonia’s consumption after specialization and trade.
True or False: Without engaging in international trade, Freedonia and Desonia 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.)
a) True
b) False
Transcribed Image Text:As you did for Freedonia, use the green Nne (triangle symbol) to plot the trading possibilitles Nne (TPL) for Desonla. Then place the black point (plus
symbol) on the trading possiblities ine to indicate Desonia's consumption after specialization and trade.
Desonia
48
42
TPL
36
PPF
30
Consumption After Trade
24
18
12
6
12
18
24
30
36
42
48
GRAIN (Millions of pounds)
True or False: Without engaging in International trade, Freedonia and Desonia 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.)
O True
O False
TEA (Millions of pounds)
Transcribed Image Text:When a country speciallizes 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 possibilitles frontiers (PPFS) for Freedonia and Desonia. Both countries produce graln and tea, each Initially
(that is, before specialization and trade) producing 18 milion pounds of grain and 9 million pounds of tea, as Indicated by grey polnts (star symbols)
labeled point A.
Freedonia
Desonia
48
48
42
42
36
36
PPF
30
30
24
24
18
PPF
18
12
12
6
12
18
24
30
36
42
48
6
12
18
24
30
36
42
48
GRAIN (MIlions of pounds)
GRAIN (Milions of pounds)
Freedonia has a comparative advantage in the production of
production of
while Desonia has a comparative advantage in the
If each fully speclalizes (that is, produces only the good for which each has a comparative advantage), the
million pounds of grain and
most the two countries can produce is
million pounds of tea.
Suppose that Freedonia and Desonia specialize and open up to Intemational trade, and the terms of trade in the world market are 1 pound of grain for
1 pound of tea. That is, Freedonla is willing to sell Desonia 1 pound of grain in exchange for 1 pound of tea, and Desonia is willing to sell Freedonla 1
pound of tea in exchange for 1 pound of grain. The countries decide to exchange 18 million pounds of grain for 18 million pounds of tea.
(spunod jo suo!w) Va1
(spunod jo suow) Va1
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