I'm confused on how to calculate the gains from trade. I don't know what to do. The accompanying tables give production possibilities data for Gamma and Sigma. Alldata are in tons.Gamma's production possibilitiesACDETea120906030Pots306090120Sigma's production possibilitiesACDETea40302010Pots306090120Assume that before specialization and trade, Gamma and Sigma both chose productionpossibility "C." Now if each specializes according to comparative advantage, the gainsfrom specialization and trade will beA) 40 tons of pots.C) 20 tons of tea and 20 tons of pots.B) 40 tons of tea.D) 20 tons of tea.

If both specialise gains from trade would be 60-20=40 tons of tea.

Answered: I'm confused on how to calculate the…

Business

Economics

I'm confused on how to calculate the gains from trade. I don't know what to do.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains Rrom Trade

Section: Chapter Questions

Problem 6PA

See similar textbooks

Related questions

Q: What is your understanding of trade when referring to the exchange of goods for goods or labor…

A: Money: Money refers to anything that is widely accepted as a medium of exchange. However, money can…

Q: Free trade is an issue of one country. What are its: a. Strength b. Weaknesses c. Opportunities d.…

A: Free trade, also called laissez-faire, a policy by which a government does not discriminate against…

Q: Who are the Winners and Losers from trade Restrictions?

A: A trade restriction is an artificial constraint on the trade of commodities and services between two…

Q: Why do governments impose tariffs?

A: Meaning of Tariffs and Quotas: The term tariff refers to the situation under which when any goods…

Q: What is a free trade

A: The term trade refers to the buying and selling of commodities and this buying and selling can be…

Q: Discuss the arguments for and against free trade

A: Free trade can also be described as the application of the free market concept to international…

Q: What are the government’s effects on trade ? Why ? Explain them briefly.

A: Profit is the total income earned after deducting the expenses from the total revenues.

Q: How would free trade occur with a small agricultural country and a large industrial country?

A: Answer: Free trade can occur between an agricultural country and an industrial country, trade is not…

Q: Why do governments intervene in trade?

A: Government interference is government legislative action that aims to alter the decisions taken…

Q: how do trade agreements affect the US economy?

A: Trade agreements are defined as contractual agreements between states or countries concerning their…

Q: Marcia Anthony, the Trade Minister, argues that the country should not adopt ISI. She asks you to…

A: Country wants to implement import substitution industrialization. It refers that country should…

Q: What is a free trade zone?

A: Free trade zones are a type of special economic zones which are free of fees related to trade like…

Q: What are the benefits gained from trade? Calculate and show them.

A: An economy possesses a comparative advantage in the production of a good or service if it can…

Q: What is the fundamental source of the gains from international trade?

A: Gains from international trade would depend oncomparative advantage.

Q: better for consumers?

A: Answer Import substitution industrialization is associated economic conception that's typically…

Q: What are the arguments against international free trade and what policies does the government have…

A: International free trade basically refers to the trade between various nations or countries freely,…

Q: Make the case for restricting international trade.

A: Countries place restrictions on international trade due to politics related to economics. Even…

Q: What are some of the major trading regions?

A: To identify some of the major trading regions.

Q: How exactly does a tariff work to restrict free trade? Who benefits from the tariff? Who is worse…

A: Answer to the question is as follows:

Q: Name the institutions that can be seen as a support mechanisms of trade. What are their services and…

A: The first step is recognizing when institutional inadequacies are to blame for problems in…

Q: Why do countries restrict trade

A: Trade restriction:- Trade restriction can be defined as artificial barriers on trade of various…

Q: How has free trade impacted the manufacturing sector of the US economy?

A: In the United States, free trade played significant role as it influenced the overall working of US…

Q: What is the importance of the terms of trade?

A: Introduction - A key economic indicator of a company's health based on its imports and exports is…

Q: Why do Countries Use Restrictions on Trade? What are the Reasons? Types of Trade Restrictions:…

A: Trade Restriction:- A trade restriction is a manufactured barrier to cross-border exchange in…

Q: What is documentation of trade?

A: We can define international trade as the exchange of goods and services across the countries.

Q: What are the overall benefits from trade and specialisation?

A: The transfer or movement of goods and services from one country or entity to another in exchange for…

Q: Some groups of nations are forming trade blocs, like North America or Europe. Are regional trade…

A: Yes, regional trade blocs are beneficial to global trade because they reduce the likelihood of…

Q: At one time, it was believed that the way for a nation to prosper was to export as much as possible…

A: In an open economy, the level of imports and exports of a country make up components of the…

Q: what is the pattern of trade (give an example)

A: Trade is defined as the exchange of commodities and services across the boundary of the country.

Q: which kind of trade is more beneficial for an economy, liberalized trade OR restricted trade? Give…

A: The main reasons for choosing the liberalized trade for economic growth are the following: It leads…

Q: Why is trade a much more complex thing than official measures?

A: Trade is the exchange of goods and services between trading parties in order to make money . And if…

Q: country has a trade surplus when

A: THE COUNTRY HAS A TRADE SURPLUS WHEN - EXPORTS EXCEED IMPORTS

Q: Which is more effective in restricting trade, quota or tariff?

A: Quota and trade, both are the government strategies or policies to restrict trade, especially…

Q: If a certain trade is good for one country, it must be good for the other country?

A: Trading activities benefit all participants. Trade must occur according to the comparative advantage…

Q: what is the rational for a country that promotes free trade to put tariffs on some imported goods…

A: A levy is a duty forced by an overseeing expert on labor and products entering or leaving the nation…

Q: How is trade opportunity created from Dubai’s resources and capabilities?

A: Maintaining trade partnerships for oil export, remaining current on tourism trends, establishing new…

Q: If a country closes off to trade and notices that the number of firms in an industry doubles in…

A: The growing returns might drive trade flows between nations with similar productivity and factor…

Question

I'm confused on how to calculate the gains from trade. I don't know what to do.

The accompanying tables give production possibilities data for Gamma and Sigma. All
data are in tons.
Gamma's production possibilities
A
C
D
E
Tea
120
90
60
30
Pots
30
60
90
120
Sigma's production possibilities
A
C
D
E
Tea
40
30
20
10
Pots
30
60
90
120
Assume that before specialization and trade, Gamma and Sigma both chose production
possibility "C." Now if each specializes according to comparative advantage, the gains
from specialization and trade will be
A) 40 tons of pots.
C) 20 tons of tea and 20 tons of pots.
B) 40 tons of tea.
D) 20 tons of tea.

Definition Definition Any of the various net benefits or net gains that a country or trader makes by participating in international trade.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

In Japan, one worker can make 5 tons of rubber or 80 radios. In Malaysia, one worker can make 10 tons of rubber or 40 radios. Who has the absolute advantage in the production of rubber or radios? How can you tell? Calculate the opportunity cost of producing 80 additional radios in Japan and in Malaysia. (Your calculation may involve fractions, which is fine,) Which country has a comparative advantage in the production of radios? Calculate the opportunity cost of producing 10 additional tons of rubber in Japan and in Malaysia. Which country has a comparative advantage in producing rubber? In this example, does each country have an absolute advantage and a comparative advantage in the same good? In what product should Japan specialize? In what product should Malaysia specialize?
True or False: The source of comparative advantage must be natural elements like climate and mineral deposits. Explain.
Does intra-industry trade contradict the theory of comparative advantage?
In Germany it takes three workers to make one television and four workers to make one video camera. In Poland It takes six workers to make one television and 12 workers to make one video camera. Who has the absolute advantage in the production of televisions? Who has the absolute advantage in the production of video cameras? How can you tell? Calculate the opportunity cost of producing one additional television set in Germany and In Poland. (Your calculation may involve fractions, which Is tine.) Which country has a comparative advantage in the production of televisions? Calculate the opportunity cost of producing one video camera in Germany and in Poland. Which country has a comparative advantage in the production of video cameras? In this example, is absolute advantage the same as comparative advantage, or not? In what product should Germany specialize? In what product should Poland specialize?