Table 3-8
Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate.

-Refer to Table 3-8.At which of the following prices would both Huang and Min gain from trade with each other?
A) 15 parasols for 10 plates
B) 15 parasols for 6 plates
C) 15 parasols for 3 plates
D) Huang and Min could not both gain from trade with each other at any price.

Question

Table 3-8
Assume that Huang and Min can switch between producing parasols and producing porcelain plates at a constant rate.
 
-Refer to Table 3-8.At which of the following prices would both Huang and Min gain from trade with each other?
A) 15 parasols for 10 plates 
B) 15 parasols for 6 plates 
C) 15 parasols for 3 plates 
D) Huang and Min could not both gain from trade with each other at any price.

Quizplus · Accepted Answer

At a price of 15 parasols for 6 plates, Huang would have a comparative advantage in producing parasols, as they could produce 6 plates in the time it would take them to produce 15 parasols. Min would have a comparative advantage in producing plates, as they could produce 15 plates in the time it would take them to produce 15 parasols. Therefore, they could trade and both benefit, with Huang receiving more plates than they could produce themselves and Min receiving more parasols than they could produce themselves. At the other prices listed, one producer would have an absolute advantage in producing both goods, and so there would be no gains from trade for both producers.

Table 3-8 Assume That Huang and Min Can Switch Between Producing Parasols