Table 3-5
Assume that England and Spain can switch between producing cheese and producing bread at a constant rate.

-Refer to Table 3-5.Without trade,England produced and consumed 32 units of cheese and 2 units of bread and Spain produced and consumed 6 units of cheese and 2 units of bread.Then,each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 7 units of cheese for 2.5 units of bread.As a result,England gained
A) 0 units of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread.
B) 1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread.
C) 7 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread.
D) 33 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread.

Question

Table 3-5
Assume that England and Spain can switch between producing cheese and producing bread at a constant rate.
 
-Refer to Table 3-5.Without trade,England produced and consumed 32 units of cheese and 2 units of bread and Spain produced and consumed 6 units of cheese and 2 units of bread.Then,each country agreed to specialize in the production of the good in which it has a comparative advantage and trade 7 units of cheese for 2.5 units of bread.As a result,England gained
A) 0 units of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread. 
B) 1 unit of cheese and 0.5 unit of bread and Spain gained 1 unit of cheese and 0.5 unit of bread. 
C) 7 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread. 
D) 33 units of cheese and 2.5 units of bread and Spain gained 7 units of cheese and 2.5 units of bread.

Quizplus · Accepted Answer

Before trade, England produced 32 units of cheese and 2 units of bread while Spain produced 6 units of cheese and 2 units of bread.

By specializing in cheese production, England can produce an extra 16 units of cheese (48 - 32) by giving up the production of bread. Similarly, by specializing in bread production, Spain can produce an extra 0.5 units of bread (2.5 - 2) by giving up the production of cheese.

After trade, England trades 7 units of cheese for 2.5 units of bread, which means England now has 25 units of cheese and 2.5 units of bread. Spain now has 1 unit of cheese and 2.5 units of bread.

Therefore, England gained 1 unit of cheese (25 - 24) and 0.5 unit of bread (2.5 - 2), while Spain gained 1 unit of cheese (1 - 0) and 0.5 units of bread (2.5 - 2).

Table 3-5 Assume That England and Spain Can Switch Between Producing Cheese