Question

Both Mia and Mario specialize in producing the item in which they have a comparative advantage. Then they trade one pasta dish for one pizza.

Before specialization and trade​ started, Mia and Mario were each producing 4 4 dishes of pasta and 4 4 pizzas an hour. The total gains from trade are​ ______ dishes of pasta and​ ______ pizzas an hour.

Answer 1

The total gains from trade are​ 4 dishes of pasta and​ 4 pizzas an hour.

Step-by-step explanation:

Before specialization, Mia and Mario each produced 4 dishes of pasta and 4 pizzas per hour. After specialization, Mia is able to produce 12 dishes of pasta, and Mario is able to produce 12 pizzas per hour.

After specialization and trade, the total maximum combined output per hour is 12 dishes of pasta and 12 pizzas. Before specialization, the total maximum combined output per hour was 8 dishes of pasta and 8 pizzas. So the net gain of specialization and trade is 4 dishes of pasta and 4 pizzas per hour.