In the table below both countries produce at the bold levels of output without trade.Assume the US and UK initiate trade and begin to completely specialize in the commodity in which they have a comparative advantage.Identify the gains from trade if the US trades 50 units of rice to the UK for 50 units of pudding.
Production Possibility Schedule for Rice and Pudding in the United States and the United Kingdom
$\begin{array}{|cc|cc|}
\hline \text { United States } &&\text {United Kingdom } \
\hline \text {Rice} & \text {Pudding} &\text { Rice }& \text {Pudding} \
\hline 140 & 0 & 35 & 0 \
\hline 120 & 10 & 30 & 10 \
\hline 100 & 20 & 25 & 20 \
\hline 80 & 30 & 20 & 60 \
\hline 60 & 40 & 15 & 80 \
\hline 40 & 50 & 10 & 100 \
\hline 20 & 60 & 5 & 120 \
\hline 0 & 70 & 0 & 140 \
\hline
\end{array}$
A)US: 10 units of pudding,20 units of rice
B)US: 30 units of pudding,30 units of rice
C)UK: 10 units of pudding,20 units of rice
D)UK: 30 units of pudding,30 units of rice

Question

In the table below both countries produce at the bold levels of output without trade.Assume the US and UK initiate trade and begin to completely specialize in the commodity in which they have a comparative advantage.Identify the gains from trade if the US trades 50 units of rice to the UK for 50 units of pudding. 
Production Possibility Schedule for Rice and Pudding in the United States and the United Kingdom
$\begin{array}{|cc|cc|}
\hline \text { United States } &&\text {United Kingdom } \
\hline \text {Rice} & \text {Pudding} &\text { Rice }& \text {Pudding} \
\hline 140 & 0 & 35 & 0 \
\hline 120 & 10 & 30 & 10 \
\hline 100 & 20 & 25 & 20 \
\hline 80 & 30 & 20 & 60 \
\hline 60 & 40 & 15 & 80 \
\hline 40 & 50 & 10 & 100 \
\hline 20 & 60 & 5 & 120 \
\hline 0 & 70 & 0 & 140 \
\hline
\end{array}$
A)US: 10 units of pudding,20 units of rice
B)US: 30 units of pudding,30 units of rice
C)UK: 10 units of pudding,20 units of rice
D)UK: 30 units of pudding,30 units of rice

Quizplus · Accepted Answer

Before trade, the US produces 30 units of pudding and 20 units of rice while the UK produces 10 units of pudding and 20 units of rice. 
After trade, the US specializes in producing pudding and trades 50 units with the UK for 50 units of rice. Now each country produces only the good in which it has a comparative advantage. The US produces 50 pudding units and the UK produces 20 rice units. 
Thus, the gains from trade are as follows:
The US gains 20 more pudding units at the cost of 20 rice units.
The UK gains 10 more pudding units at the cost of 20 rice units.
Therefore, the best choice is D where the UK gains 30 units of pudding and 30 units of rice.

In the Table Below Both Countries Produce at the Bold