(Solved): When a country has a comparative advantage in the production of a good, it means that it can prod ...

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 Desonia. Both countries produce lemons and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. Maldonia has a comparative advantage in the production of , while Desonia has a comparative advantage in the production of . Suppose that Maldonia 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. Suppose that Maldonia and Desonia 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 lemons for 24 million pounds of sugar. This ratio of goods is known as the price of trade between Maldonia and Desonia. 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 Maidonia's consumption after trade. Note: Dashed drop lines will automatically extend to both awes. The following graph shows the same PpF for Desonia as before, as well as its initial consumption at point A. As you did for Maldonia, place a black point (plus symbol) on the following graph to indicate Desonia's consumption after trade. True or False: Without engaging in intemational trade, Maldonia and Desonia would not have been able to consume at the after-trade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) True False