it is just one exercise

Candonia has a comparative advantage in the production of V , while Lamponia has a comparative advantage in the production of V . Suppose that Candonia and Lamponia specialize in the production of the goods in which each has a comparative advantage. After specialization, the two countries can produce a total of E million pounds of tea and E million pounds of grain. Suppose that Candonia and Lamponia 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 grain for 24 million pounds of tea. This ratio of goods is known as the price of trade between Candonia and Lamponia. The Following graph shows the same PPF for Candonia as before, as we\" as its initial' consumption at point A. Place a black point {plus symboi) on the graph to indicate Candonia's consumption after trade. Note: Dashed drop lines will automatically extend to both axes. True or False: Without engaging in international trade, Candonia and Lamponia would not have been able to consume at the aftertrade consumption bundles. (Hint: Base this question on the answers you previously entered on this page.) 0 True 0 False -iomework (Ch 03) 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 Candonia and Lamponia. Both countries produce grain and tea, each initially (i.e., before specialization and trade) producing 24 million pounds of grain and 12 million pounds of tea, as indicated by the grey stars marked with the letter A. Candonia Lamponia 64 64 _ 56 56 1F 45 PPF a 48 _ "U 'U I: I: 3 40 + 3 40 + D. D. "6 \"6 no 32 m 32 I: I: s g E 2" ' E 24 PF E E ' 16 ' A ' 16 ' A - - - - - - - - - B - B - I I D I] l] 8 1E 24 32 40 45 EB 64 0 B 16 24 32 40 43 56 64 GRAIN (Millions of pounds) GRAiN (Millions of pounds)