Assume that Andy and Henry, without trading with each other, will produce and consume the following number of steel bars and ketchup bottles. The Gains from Trade Without trade Person Good Production Consumption Gains from Trade Andy Steel bars 60 60 +35 Bottles of ketchup 60 60 +15 Henry Steel bars 20 20 +5 Bottles of ketchup 20 20 +5 Now, assume that both Andy and Henry decide to specialize, and then Andy trades 25 steel bars to Henry for 75 ketchup bottles. This outcome is shown in the table below. Compared to the result without trade, what are the gains from trade that Andy experiences when he and Henry specialize and trade? The Gains from Trade With specialization and trade Consumption Person Good Production Gains from Trade Andy Steel bars 120 95 (keeps) +35 Bottles of ketchup 75 (from Henry) F15 25 (from Andy) 5 +5 10 Henry Steel bars Bottles of ketchup 100 25 (keeps) O steel bars and 0 ketchup bottles 120 steel bars and 0 ketchup bottles 35 steel bars and 15 ketchup bottles 15 steel bars and 35 ketchup bottles

Assume that Andy and Henry, without trading with each other, will produce and consume the following number of steel bars and ketchup bottles. The Gains from Trade Without trade Person Good Production Consumption Gains from Trade Andy Steel bars 60 60 +35 Bottles of ketchup 60 60 +15 Henry Steel bars 20 20 +5 Bottles of ketchup 20 20 +5 Now, assume that both Andy and Henry decide to specialize, and then Andy trades 25 steel bars to Henry for 75 ketchup bottles. This outcome is shown in the table below. Compared to the result without trade, what are the gains from trade that Andy experiences when he and Henry specialize and trade? The Gains from Trade With specialization and trade Consumption Person Good Production Gains from Trade Andy Steel bars 120 95 (keeps) +35 Bottles of ketchup 75 (from Henry) F15 25 (from Andy) 5 +5 10 Henry Steel bars Bottles of ketchup 100 25 (keeps) O steel bars and 0 ketchup bottles 120 steel bars and 0 ketchup bottles 35 steel bars and 15 ketchup bottles 15 steel bars and 35 ketchup bottles

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains From Trade

Section: Chapter Questions

Problem 3CQQ

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