Figure 3-3
Ice cream and cones are measured in kilograms.
-Refer to Figure 3-3. Suppose Ben and Jerry were both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 kg of cones to get 2 kg 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?

Question

Figure 3-3
Ice cream and cones are measured in kilograms. 
-Refer to Figure 3-3. Suppose Ben and Jerry were both producing at point A on their production possibilities frontier and then Ben decided he would be willing to trade 4 kg of cones to get 2 kg 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?

Quizplus · Accepted Answer

Ben has a comparative advantage in producing cones, and Jerry has a comparative advantage in producing ice cream. By specializing and trading, Ben can get 1 kg of ice cream for every 2 kg of cones he trades away, while Jerry can get 1 kg of cones for every 2 kg of ice cream he trades away. Therefore, the most beneficial trade for both parties would be for Ben to trade 4 kg of cones for 2 kg of ice cream from Jerry, resulting in a gain of 1 kg of ice cream for Ben and 1 kg of cones for Jerry.

Figure 3-3 Ice Cream and Cones Are Measured in Kilograms