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When a country has a comparative advantage in the production ofa good, it means that it can produce this good at a loweropportunity cost than its trading partner. Then the country willspecialize in the production of this good and trade in for othergoods. The following graphs show the production possibilitiesfrontiers (PPFs) for Shenandoah and Rainiec. Both countries producealmonds and pistachios, each initially (i.e., before specializationand trade) producing 6 million pounds of almonds and 3 millionpounds of pistachios, as indicated by the grey stars marked withthe letter A.Shenandoah has a comparative advantage in theproduction of

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, while Rainier has a comparative advantage in the productionof

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- Suppose that Shenandoah and Rainier specialize in theproduction of the goods in which each has a comparative advantage.After specialization, the two countries can produce a total of

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million pounds of almonds and

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million pounds of pistachios. Suppose that Shenandoah andRainier agree to trade. Each country focuses its resources onproducing only the good in which it has a comparative advantage.The countries decide to exchange 6 million pounds of almonds for 6million pounds of pistachios. This ratio of goods is known as theprice of trade between Shenandoah and Rainier. The following graphshows the same PPF for Shenandoah as before, as well as its initialconsumption at point A. Place a black point (plus symbol) on thegraph to indicate Shenandoah's consumption after trade. Note:Dashed drop lines will automatically extend to both axes.the graphto indicate Shenandoah's consumption after trade. Note: Dashed droplines will automatically extend to both axes. (?) Consumption AfterTradeTrue or False: Without engaging in international trade,Shenandoah and Rainier would have been able to consume at theafter-trade consumption bundles. (Mint: Base this question on theanswers you previously entered on this page.) True False

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