Let's break down the problem step-by-step: ## Step 1: Understanding the Problem You are given the production possibilities frontiers (PPFs) for two countries, **Zarno** and **Ardena**, which show the trade-off between producing cashews and thyme. Both countries initially produce 6 million pounds of cashews and 3 million pounds of thyme (point A on both graphs). ## Step 2: Reading the PPFs Let’s extract the endpoints of each PPF (the intercepts): **From the graphs:** ### Zarno - If Zarno produces **only thyme**, it produces **15 million pounds** (where the PPF meets the Y-axis). - If Zarno produces **only cashews**, it produces **15 million pounds** (where the PPF meets the X-axis). ### Ardena - If Ardena produces **only thyme**, it produces **9 million pounds** (Y-intercept). - If Ardena produces **only cashews**, it produces **15 million pounds** (X-intercept). ## Step 3: Opportunity Cost Calculation For each country, the opportunity cost of producing 1 more unit of a good is the amount of the other good that must be given up. ### Zarno - To go from 15 thyme to thyme, Zarno produces to 15 cashews (15 cashews). - Slope: -15 thyme / 15 cashews = -1 thyme per cashew. **Opportunity cost of 1 cashew = 1 thyme** **Opportunity cost of 1 thyme = 1 cashew** ### Ardena - To go from 9 thyme to thyme, Ardena produces to 15 cashews (15 cashews). - Slope: -9 thyme / 15 cashews = -.6 thyme per cashew. **Opportunity cost of 1 cashew = .6 thyme** **Opportunity cost of 1 thyme = 1/.6 = 1.67 cashews** ## Step 4: Comparative Advantage - **Zarno:** Opportunity cost of 1 cashew = 1 thyme; of 1 thyme = 1 cashew. - **Ardena:** Opportunity cost of 1 cashew = .6 thyme; of 1 thyme = 1.67 cashews. ### Who has the comparative advantage in each good? - **Cashews:** Lower opportunity cost in Ardena (**.6 thyme < 1 thyme**) ⇒ Ardena has comparative advantage in cashews. - **Thyme:** Lower opportunity cost in Zarno (**1 cashew < 1.67 cashew**) ⇒ Zarno has comparative advantage in thyme. ## Step 5: Specialization - **Ardena** should specialize in **cashews**. - **Zarno** should specialize in **thyme**. ## **Final Answers (Summary Table)** | Country | Comparative Advantage | Should Specialize in | |---------|----------------------|----------------------| | Zarno | Thyme | Thyme | | Ardena | Cashews | Cashews | --- ### **Explanation** - **Comparative advantage** is determined by the lower opportunity cost. - **Absolute advantage** is not considered here since we focus on opportunity costs. - **Specialization** increases total output and allows both countries to benefit from trade. --- ## **Final Answer** - **Zarno** has the comparative advantage in **thyme** and should specialize in producing thyme. - **Ardena** has the comparative advantage in **cashews** and should specialize in producing cashews.