ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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 Glacier and Denali. Both countries produce corn and pistachios, each initially
(i.e., before specialization and trade) producing 18 million pounds of corn and 9 million pounds of pistachios, as indicated by the grey stars marked
with the letter A.
PISTACHIOS (Millions of pounds)
48
42
36
30
24
18
12
6
0
0
PPF
6
Glacier
A
12 18 24 30
36
CORN (Millions of pounds)
42
48
?
PISTACHIOS (Millions of pounds)
48
42
36
30
24
18
12
6
0
0
PPF
+
6
Denali
12
18 24 30 36
CORN (Millions of pounds)
42
48
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Transcribed Image Text: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 Glacier and Denali. Both countries produce corn and pistachios, each initially (i.e., before specialization and trade) producing 18 million pounds of corn and 9 million pounds of pistachios, as indicated by the grey stars marked with the letter A. PISTACHIOS (Millions of pounds) 48 42 36 30 24 18 12 6 0 0 PPF 6 Glacier A 12 18 24 30 36 CORN (Millions of pounds) 42 48 ? PISTACHIOS (Millions of pounds) 48 42 36 30 24 18 12 6 0 0 PPF + 6 Denali 12 18 24 30 36 CORN (Millions of pounds) 42 48
Glacier has a comparative advantage in the production of
production of
Suppose that Glacier and Denali specialize
comparative advantage. After specialization, the two countries can produce a total of
of corn.
.
while Denali has a comparative advantage in the
in the production of the goods in which each has a
million pounds of pistachios and
I
million pounds
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Transcribed Image Text:Glacier has a comparative advantage in the production of production of Suppose that Glacier and Denali specialize comparative advantage. After specialization, the two countries can produce a total of of corn. . while Denali has a comparative advantage in the in the production of the goods in which each has a million pounds of pistachios and I million pounds
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