Economics help Suppose that before specialization and trade Jim produced 0.75 to

Question

Economics help

Suppose that before specialization and trade Jim produced 0.75 tons of potatoes and 1 ton of corn per year. Peter produced 2.5 tons of potatoes and 2 tons of corn per year. Then they specialize and trade taking advantage of their comparative advantages. After that peter sells jim 1.5 tons of potatoes in exchange for 3 tons of corn.

a) How much potatoes and corn does jim have after the trade?

b) How much does jim gain in the amount of each good compared to his initial production

c) How much potatoes and corn does peter have after the trade?

d) How much does peter gain in the amount of each good compared to his initial production?

Explanation / Answer

a) Jim has 1.5 tons of potatoes and 4-3 = 1 ton of corn

b)Jim gains 0.75 tons of potatoes and 0 tons of corn.

c) Peter has 5- 1.5 = 3.5 tons of potatoes and 0+3 =3 tons of corn

d) Peter gains 1 ton of corn and 1 ton of potatoes

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