ECO 304L Lecture Notes - Lecture 5: Opportunity Cost, Comparative Advantage

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As you did for candonia, place a black point (plus symbol) on the following graph to indicate lamponia"s consumption after trade: 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. 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. Candonia has a comparative advantage in the production oferror! , while lamponia has a comparative advantage in the production oferror! Suppose that candonia and lamponia specialize in the production of the goods in which each has a comparative advantage.

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