Question

Without trade jake consumes 20 pounds of green beans and 80 pounds of corn, and jane consumes 40 pounds of green beans and 40 pounds of corn. If the terms of trade are 1 pound of green beans for 3 pounds of corn, and jake sells jane 72 pounds of corn, then the gains from trade for jane are ______ pounds of green beans and ______ pounds of corn with trade and specialization.

Answer 1

Answer: 4,8

Explanation:

Without trade Jake consumes 20 pounds of green beans and 80 pounds of corn

Jane consumes 40 pounds of green beans and 40 pounds of corn.

Terms of trade are 1 pound of green beans for 3 pounds of corn.  

Jake sells Jane 72 pounds of corn in exchange for $\frac{72}{3} = 24$ pounds of green beans.

Thus, Jane gains $24 - 20 = 40$ green beans and $80-72 = 8$ pounds of corn.