Table 3-4
Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate.

-Refer to Table 3-4.Assume that the farmer and the rancher each has 24 labor hours available.If each person spends all his time producing the good in which he has a comparative advantage and trade takes place at a price of 1 pound of meat for 2 pounds of potatoes,then
A) the farmer and the rancher will both gain from this trade.
B) the farmer will gain from this trade, but the rancher will not.
C) the rancher will gain from this trade, but the farmer will not.
D) neither the farmer nor the rancher will gain from this trade.

Question

Table 3-4
Assume that the farmer and the rancher can switch between producing meat and producing potatoes at a constant rate.
 
-Refer to Table 3-4.Assume that the farmer and the rancher each has 24 labor hours available.If each person spends all his time producing the good in which he has a comparative advantage and trade takes place at a price of 1 pound of meat for 2 pounds of potatoes,then
A) the farmer and the rancher will both gain from this trade. 
B) the farmer will gain from this trade, but the rancher will not. 
C) the rancher will gain from this trade, but the farmer will not. 
D) neither the farmer nor the rancher will gain from this trade.

Quizplus · Accepted Answer

The farmer has a comparative advantage in producing potatoes (can produce 4 pounds of potatoes per hour vs. 1/2 pound of meat per hour), while the rancher has a comparative advantage in producing meat (can produce 2 pounds of meat per hour vs. 1/3 pound of potatoes per hour). 
If the farmer spends all 24 hours producing potatoes, he can produce 96 pounds of potatoes. 
If the rancher spends all 24 hours producing meat, he can produce 48 pounds of meat.
If they trade at a price of 1 pound of meat for 2 pounds of potatoes, then the farmer can get 48 pounds of meat in exchange for 96 pounds of potatoes. This trade results in both the farmer and the rancher gaining from trade, as they both end up with more of both goods than if they had not traded.

Table 3-4 Assume That the Farmer and the Rancher Can Switch Between