Question

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 Congaree. Both countries produce peas and lentils, each initially (i.e., before specialization and trade) producing 24 million pounds of peas and 12 million pounds of lentils, as indicated by the grey stars marked with the letter A.

Answer 1

Comparative advantage allows countries to produce goods at lower opportunity costs, leading to efficient global production and trade. Absolute advantage, on the other hand, is when a country simply produces more of a good. The PPF illustrates the trade-offs and opportunity costs involved in these decisions.

Step-by-step explanation:

When a country can produce a good at a lower opportunity cost than another country, it is said to have a comparative advantage in producing that good. This concept differs from absolute advantage, which exists when a country is able to produce more of a good outright. For example, Brazil's ability to produce a larger quantity of sugar cane relative to the U.S. if it allocated all its resources to its production is indicative of an absolute advantage.

Comparative advantage is crucial for trade because it allows countries to specialize in producing goods where they have the lowest opportunity cost, leading to more efficient global production and higher levels of consumption globally. This economic principle is reflected in the production possibilities frontier (PPF), which illustrates the potential trade-offs a country faces when deciding which goods to produce and highlights the differing opportunity costs of production based on various factors like climate, geography, technology, or skills.