Once again, consider Babs and Donna, who can each produce cake, beer, or some combination of the two using only 40 hours of labor each. Babs can produce a maximum of 50 cakes if she produces no beer, and 100 units of beer if she produces no cake. Donna can produce a maximum of 100 cakes with no beer produced; if she makes no cake, she can produce 120 units of beer. In autarky, each producer spent half of her time producing cake and the other half producing beer. But now let's say that Babs and Donna decide to trade with each other. They decide that each producer will fully specialize in the good where she has comparative advantage. Later, they will work out the details on how much beer will trade for how many cakes and vice versa. Calculate the gains in trade in cakes that Babs and Donna together (as a group) will experience due to trading. In other words, tell me how many more cakes the two of them can now consume (together) by trading instead of remaining in autarky. (Carefully follow all numeric instructions. If you find Babs and Donna can consume fewer cakes than before, include a negative sign in your answer. Otherwise, enter only a number and a decimal point if needed, rounding your answer to two decimal places as needed.)
Once again, consider Babs and Donna, who can each produce cake, beer, or some combination of the two using only 40 hours of labor each. Babs can produce a maximum of 50 cakes if she produces no beer, and 100 units of beer if she produces no cake. Donna can produce a maximum of 100 cakes with no beer produced; if she makes no cake, she can produce 120 units of beer. In autarky, each producer spent half of her time producing cake and the other half producing beer. But now let's say that Babs and Donna decide to trade with each other. They decide that each producer will fully specialize in the good where she has comparative advantage. Later, they will work out the details on how much beer will trade for how many cakes and vice versa. Calculate the gains in trade in cakes that Babs and Donna together (as a group) will experience due to trading. In other words, tell me how many more cakes the two of them can now consume (together) by trading instead of remaining in autarky. (Carefully follow all numeric instructions. If you find Babs and Donna can consume fewer cakes than before, include a negative sign in your answer. Otherwise, enter only a number and a decimal point if needed, rounding your answer to two decimal places as needed.)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Once again, consider Babs and Donna, who can each produce cake, beer, or some combination of
the two using only 40 hours of labor each. Babs can produce a maximum of 50 cakes if she
produces no beer, and 100 units of beer if she produces no cake. Donna can produce a maximum
of 100 cakes with no beer produced; if she makes no cake, she can produce 120 units of beer.
In autarky, each producer spent half of her time producing cake and the other half producing
beer. But now let's say that Babs and Donna decide to trade with each other. They decide that
each producer will fully specialize in the good where she has comparative advantage. Later, they
will work out the details on how much beer will trade for how many cakes and vice versa.
Calculate the gains in trade in cakes that Babs and Donna together (as a group) will experience
due to trading. In other words, tell me how many more cakes the two of them can now consume
(together) by trading instead of remaining in autarky.
(Carefully follow all numeric instructions. If you find Babs and Donna can consume fewer cakes than
before, include a negative sign in your answer. Otherwise, enter only a number and a decimal point if
needed, rounding your answer to two decimal places as needed.)
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