Figure 3-3
Ice cream is measured in kilograms.
-Refer to Figure 3-3. Ben and Jerry were currently both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 pounds of cones to get 2 pounds of ice cream from Jerry. If both decided to specialize in what they had a comparative advantage in and trade, what would be the gains from trade?
A)1 pound of cones for Ben and 1 pound of ice cream for Jerry.
B)1 pound of ice cream for Ben and 1 pound of cones for Jerry.
C)2 pounds of ice cream for Ben and 2 pounds of cones for Jerry.
D)2 pounds of ice cream for Ben and 1 pound of cones for Jerry.

Question

Figure 3-3
Ice cream is measured in kilograms. 
-Refer to Figure 3-3. Ben and Jerry were currently both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 pounds of cones to get 2 pounds of ice cream from Jerry. If both decided to specialize in what they had a comparative advantage in and trade, what would be the gains from trade?
A)1 pound of cones for Ben and 1 pound of ice cream for Jerry. 
B)1 pound of ice cream for Ben and 1 pound of cones for Jerry. 
C)2 pounds of ice cream for Ben and 2 pounds of cones for Jerry. 
D)2 pounds of ice cream for Ben and 1 pound of cones for Jerry.

Quizplus · Accepted Answer

Both Ben and Jerry have a comparative advantage - Ben in producing cones and Jerry in producing ice cream. By specializing in these areas and trading, they can both achieve gains from trade. Ben can produce 8 pounds of cones or 4 pounds of ice cream in a day, while Jerry can produce 10 pounds of ice cream or 5 pounds of cones in a day. If Ben trades 4 pounds of cones to Jerry for 2 pounds of ice cream, he is still left with 4 pounds of cones. Meanwhile, Jerry gains 4 pounds of cones (since he can produce 5 pounds of cones in a day but only needs 1 pound for himself) and gives up only 2 pounds of ice cream (since he can produce 10 pounds of ice cream in a day but only needs 8 pounds for himself). Therefore, the gains from trade for Ben are 1 pound of ice cream and the gains from trade for Jerry are 1 pound of cones. So, the answer is B - 1 pound of ice cream for Ben and 1 pound of cones for Jerry.

Figure 3-3 Ice Cream Is Measured in Kilograms