1: a)tea b)potatoes c)neither potatos nor tea d)both tea and potatoes 2)a) tea b

Question

1: a)tea b)potatoes c)neither potatos nor tea d)both tea and potatoes 2)a) tea b)potatoes c)neither potatos nor tea d)both tea and potatoes 3) 36 48 30 6 12 18 24 42 3 millions 4) 24 42 48 12 6 3 36 18 30 millions a courses.aplia.com 18FA ESL301 63910: Academic Wr Aplia: Student Question MindTap-Cengage Learning Attempts rage 2. Specialization and trade Aa Aa Economists believe that when two countries specialize and trade, each country will be able to buy the goods in which the other specializes at a lower cost than it would take to produce those goods themselves. The following graphs show the production possibilities frontiers (PPFs) for Freedonia and Sylvania. Both countries produce tea and potatoes. Without specialization and trade, both countries produce 18 million pounds of tea and 12 million pounds of potatoes, as indicated by the grey stars marked A. Assume that when Freedonia and Sylvania open to international trade, they trade with many other countries, as well with each other. Freedonia Sylvania TEA (Millions of pounds 48 TEA (Millions of poundsl 48 36 36 30 24 18 12 18 12 0612 18 24 30 36 42 48 POTATOES (Milions of poundsl 0 6 12 1824 30 36 42 POTATOES IMlions of p sl Freedonia has a comparative advantage in the production of comparative advantage in the production of produces only the good for which each has a comparative advantage), the most the two countres can produce is tea while Sylvania has a potatoes If each fully specializes (that is, 24 million pounds of tea and 24 million pounds of potatoes. 2.

Explanation / Answer

Answer:- Opportunity cost of Potatos in terms of tea for Freedoniya is 2 units of tea which is larger than Sylvaniya 0.5 units of tea.

So Freedonia has a comparative advantage in the production of Tea and Sylvania has comparative advantage in the production of Potatos as it has lower opportunity cost than others.

If both countries produces in which they have comparitive advantage then Freedonia will produce 36 millions of pounds and Sylvania will produce 48 millions of pounds.

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