3.7 Coffee and Cheese Exchange in a POW Camp. Suppose that in the British compound of a POW camp, the price of cheese is 6 cigarettes per cheese ration and the price of coffee beans is 3 cigarettes per coffee ration. In the French compound, the price of coffee beans is 24 cigarettes per ration.

a. Is there an opportunity for beneficial exchange?

b. A British prisoner could exchange his cheese ration for cigarettes, then exchange the extra cigarettes for coffee rations in the British compound. If he travels to the French compound, he could exchange the extra coffee for cigarettes. When he returns to the British compound, he can exchange the extra. cigarettes for cheese rations. In other words, his net gain from trade is cheese rations.