Question

4. Specialization and trade 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 Sylvania. Both countries produce grain and coffee, each initially (i.e., before specialization and trade) producing 6 million pounds of grain and 3 million pounds of coffee, as indicated by the grey stars marked with the letter A. Maldonia Sylvania PPF COFFEE (Millions of pounds) COFFEE (Millions of pounds) PPF 0 0 + 2 14 16 0 2 14 16 4 6 8 10 12 GRAIN (Millions of pounds) 4 6 8 10 12 GRAIN (Millions of pounds)

Answer 1

Maldenia ha whili Sylvanio has cA prod"af fran CA n Guo counbris podu total of 12 mlus powdsgnain and 12mllaon pounhs of Coffes Tragle Maldonia bnfaana 1 2 dcetl L4 PRC /2 ihal mo heen Falsi, wimout ao posibls