Question
consider Leo and Mark, who can produce cookies and tea using only 10 labor hours each.Leo can produce 60 cookies if he produces no tea;
consider Leo and Mark, who can produce cookies and tea using only 10 labor hours each.Leo can produce 60 cookies if he produces no tea; he can produce 20 units of tea if he produces no cookies.Mark can produce 40 cookies if he produces no tea; he can produce 16 units of tea if he produces no cookies.
In autarky, each producer spent half of his time producing tea and the other half producing cookies.But now let's say that Leo and Mark decide to trade with each other.They decide that each producer will fully specialize in the good where he has comparative advantage.Later, they will work out the details on how much tea will trade for how many cookies and vice versa.
Calculate the gains in trade in cookies that Leo and Marktogether(as a group) will experience due to trading.In other words, tell me how many more cookies the two of them can now consume (together) by trading instead of remaining in autarky.
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