Kim can produce 40 pies or 400 cakes in an hour. Liam can produce 100 pies and 200 cakes in an hour.

1) Who has the comparative advantage & absolute advantage in pies?

2) Assume that Kim and Liam agree to specialize in the good which they have the comparative advantage. However, each likes to consume both pies and cakes. Which of the following is an acceptable term of trade? If it is not acceptable, then which person would be made worse off by the trade?