George and Martha face the production possibilities frontiers shown for brownies and cupcakes.
a. If George and Martha choose not to trade and divide their time equally between the production of brownies and cupcakes, how many of each would they be able to consume? (Show this point on your graphs.)
b. Now assume that George and Martha each decide to specialise in the good in which they have a comparative advantage and then trade. Who would trade brownies and who would trade cupcakes?
c. If George and Martha decided to trade 60 brownies for 60 cupcakes, how many cupcakes and brownies would each have to consume?
d. How do we know each is better off with trade than acting alone?

Question

George and Martha face the production possibilities frontiers shown for brownies and cupcakes.
  a. If George and Martha choose not to trade and divide their time equally between the production of brownies and cupcakes, how many of each would they be able to consume? (Show this point on your graphs.)
b. Now assume that George and Martha each decide to specialise in the good in which they have a comparative advantage and then trade. Who would trade brownies and who would trade cupcakes?
c. If George and Martha decided to trade 60 brownies for 60 cupcakes, how many cupcakes and brownies would each have to consume?
d. How do we know each is better off with trade than acting alone?

Quizplus · Accepted Answer

The Answer of George and Martha face the production possibilities frontiers shown for brownies and cupcakes.
  a. If George and Martha choose not to trade and divide their time equally between the production of brownies and cupcakes, how many of each would they be able to consume? (Show this point on your graphs.)
b. Now assume that George and Martha each decide to specialise in the good in which they have a comparative advantage and then trade. Who would trade brownies and who would trade cupcakes?
c. If George and Martha decided to trade 60 brownies for 60 cupcakes, how many cupcakes and brownies would each have to consume?
d. How do we know each is better off with trade than acting alone?

George and Martha Face the Production Possibilities Frontiers Shown for Brownies