Refer to the data below. Assume that before specialization and trade Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage, the gains from specialization and trade will be: Production possibilities data for Gamma and Sigma. All data are in tons.
Gamma production possibilities: Sigma production possibilities:

Question

Refer to the data below. Assume that before specialization and trade Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage, the gains from specialization and trade will be: Production possibilities data for Gamma and Sigma. All data are in tons.
Gamma production possibilities:  Sigma production possibilities:

Quizplus · Accepted Answer

According to the production possibility data, Gamma has a comparative advantage in producing tea (can produce 20 tons of tea compared to only 10 tons of pots) while Sigma has a comparative advantage in producing pots (can produce 20 tons of pots compared to only 10 tons of tea). Therefore, if they specialize according to their comparative advantage and trade with each other, Gamma will produce and export 40 tons of tea while Sigma will produce and export 40 tons of pots. They will then trade with each other to obtain the goods they do not produce, resulting in both Gamma and Sigma being able to consume 40 tons of tea and 40 tons of pots. Therefore, the gains from specialization and trade will be 40 tons of tea and 40 tons of pots.

Refer to the Data Below