The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.Table 2.4

-The difference between what can be produced and consumed without specialization and trade and with specialization and trade is called:

Question

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.Table 2.4
 
-The difference between what can be produced and consumed without specialization and trade and with specialization and trade is called:

Quizplus · Accepted Answer

The table shows that Ohio has a comparative advantage in producing cookies (6 per hour) and Iowa has a comparative advantage in producing chilies (4 per hour). Without specialization and trade, Ohio can produce a maximum of 6 cookies and 2 chilies in an hour while Iowa can produce a maximum of 2 cookies and 4 chilies in an hour. However, with specialization and trade, Ohio can specialize in producing cookies and produce 12 cookies in 2 hours, while Iowa can specialize in producing chilies and produce 8 chilies in 2 hours. They can then trade with each other to obtain both products, resulting in gains from trade. Therefore, the best choice is E - gains from trade.

The Table Given Below Represents the Output Per Hour of Cookies