When a country has a comparative advantage in the production of a gond, it means

Question

When a country has a comparative advantage in the production of a gond, it means that it can produce this good st a lower opportiunity cost than lts trading partner. Then the country will specialize in the production of ths good and trade it for other goods The following graphs shaw the production possibilities frontiers (PPFs) for Candonia and Sylvanla. Both countries procuce lemons and tes, each initaly (l.e, before speclalization and trade) producing 18 million pounds of lemons and 9 million pounds of tea, as indicated by the gney stars marked with the letter A. Candionia Sylvania O12430 42 LEMONS Mns of pounds LEMONS (Milons of pounds) Candonia has oon parative advantage in the production of production of comparative advantage. After specialization, the two countries can produce a total of .. wis Syvania hage comperetive acvantage in the Cardonla and Syivania spécialias in the production of the goods jn which each has a the p milion pounds of lemons and Suppose that Candoola and Sylvaria milion pounas or

Explanation / Answer

The Table here is the PPF of Tea and Lemon  

Now Find the Opportunity cost

Candonia (Tea) = 36 / 18 = 2

Candonia (Lemon) = 18/36 = 1/2

Sylvania (Tea) = 24 / 36 = 2/3

Sylvania (Lemon) = 36 / 24 = 3/2

So the country has a comparative advantage in such goods who has less opportunity cost.

Candonia has a comparative advantage in the production of Lemon, while Sylvania has a comparative advantage in the production of Tea.

After specialization, the two countries can produce a total of 36 million pounds of Lemons and 36 million pounds of Tea.

Hope this answer will help you if you have any query then ask in comments

Tea Lemon Candonia 18 36 Sylvania 36 24

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.