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Questions
ECON 2002.01 AU2025 (21333) Final Exam- Requires Respondus LockDown Browser
Single choice
Suppose you initially produce 1 cherry pie and 1 cheesecake, and your neighbor produces 1 cherry pie and 3 cheesecakes. After you decide to specialize and trade you produce 2 cherry pies and 0 cheesecakes, and your neighbor produces 0 cherry pies and 6 cheesecakes. What are the total gains from trade?
Options
A.there are no gains from trade
B.2 cherry pies, 6 cheesecakes
C.2 cheesecakes
D.2 cherry pies
View Explanation
Standard Answer
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Approach Analysis
We start by restating the scenario to compare pre-trade output with post-trade output. Pre-trade: you produce 1 cherry pie and 1 cheesecake, your neighbor produces 1 cherry pie and 3 cheesecakes. Total production before specialization: 2 cherry pies and 4 cheesecakes. After specialization and trade: you produce 2 cherry pies and 0 cheesecakes, your neighbor produces 0 cherry pies and 6 cheesecakes.......Login to view full explanationLog in for full answers
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