O ( 0 Math and Graphing Tutorial ( x 2-MindTap-Cen CSecure https://ng.cengage.com/static/nb/ui/index.html?nbld 849911&nbNodeld; ? Apps G Google ? Learn Eli Review-Studen- ALEKS-Assessm y, webAssign- Course Modules: SU18 ECON × MINDTAP Aplia Homework: Production Possibilitles Frontier Framework 7. Specialization and trade When a country specializes 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 possibilities frontiers (PPFs) for Freedonis and Sylvania, Both countries produce grain and coffee, each initially(e., before specialization and trade) producing 12 milion pounds of grain and 6 million pounds of coffee, as ndicated by the grey stars marked with the letter A. Sylvania Freedonia has a comparative advantage in the preduction of advantage in the production of \"while Sylvana has a comparative Suspose that Freederia and Sylvania specialze in the production of the mion pounds of coffee and mialion peuncs of grain Suppose that Freedonia and Sylvania agree to trade Each cou try fecuses its resources on produoing only the good in which it has a tive advantage. The countries cecide to exchange 4 malion pounes of gran for 4 milion pounds of coffee This ratio of goeds termis of trade between Freedonia and Sylvania
Freedonia has a comparative advantage in the production of coffee, while Sylvania has a comparative advantage in the production of grain. Suppose that Freedonia and Sylvania specializes in the production of the goods in whcih each has a comparative advantage.After specialization,the two countries can produce a total of 24 million pounds of coffee and 24 million pounds of grain.
As the opportunity cost of producing coffee by Freedonia is 16 million pounds of Grain which is lower than the opportunity cost of producing coffee by Sylvania which is 24 million pounds of Grain. So Freedonia would produce coffee.
Opportunity cost of producing Grain by Sylvania is 12 million pounds of Coffee which is lower than the opportunity cost of producing grain by Freedonia which is 24 million pounds of coffee,so Sylvania will produce Grain.
After specialization and free trade, Freedonia will only produce coffee which is 24 million pounds of coffee due to is comparative advantage and Sylvania will only produce Grain, which is 24 million pounds of Grain.
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