TNT Posted February 27, 2011 Report Share Posted February 27, 2011 Can someone show me how to do this?Kim can produce 40 pies an hour or 400 cookies an hour. Laim can produce 100 pies an hr or 200 cookies an hr. What is the highest price of a pie at which kim and liam would agree to trade pies and cookies? If kim and liam specialize and trade what are the gain and trade? Reply Link to post Share on other sites More sharing options...
Keel Posted March 13, 2011 Report Share Posted March 13, 2011 Can someone show me how to do this?Kim can produce 40 pies an hour or 400 cookies an hour. Laim can produce 100 pies an hr or 200 cookies an hr. What is the highest price of a pie at which kim and liam would agree to trade pies and cookies? If kim and liam specialize and trade what are the gain and trade?Kim's opportunity cost per pie: 400/40 = 10 cookiesLiam's oppurtunity cost per pie: 200/100 = 2 cookiesTherefore, Liam has comparative advantage in producing pies and Kim has comparative advantage in cookies.If they both specialise in trade, they will both benefit as the overall production of pies and cookies will increase thus increasing the gains in trade. Reply Link to post Share on other sites More sharing options...
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