Question

Page(s) 39-41 2.3. What are the benefits of specialization and trade? In one month, Mikhail’s Furnishings can make 160 carpets or 160 quilts, while Dominique’s Parlor can make 120 carpets or 200 quilts. Currently, Mikhail’s is making 80 carpets and 80 quilts per month while Dominique’s is making 60 carpets and 100 quilts. If from now on Mikhail’s starts making nothing but carpets and Dominique’s makes nothing but quilts, and the two shops trade 90 quilts from Dominique’s for 70 carpets from Mikhail’s every month, what will be each shop’s gain from trade? Answer the question by matching gains to shop.

Answer 1

Answer:

Mikhail's gains 10 carpets and 10 quilts from the trade. Dominique's also gains 10 carpets and 10 quilts from the trade.

Step-by-step Explanation:

Step 1: Capacity

Mikhail's can make 160 carpets or 160 quilts per month.

Dominique's can make 120 carpets or 200 quilts per month.

Step 2: Before Trade

Mikhail's makes 80 carpets and 80 quilts per month.

Dominique's makes 60 carpets and 100 quilts per month.

Step 3: After Trade:

Mikhail's makes 160 carpets per month.

Dominique's makes 200 quilts per month.

Trade = 70 carpets for 90 quilts.

Mikhail's now has 160 - 70 = 90 carpets and 90 quilts.

Dominique's now has 70 carpets and 200 - 90 = 110 quilts

Step 4: Gains from Trade:

Mikhail's gains 90 - 80 = 10 carpets and 90 - 80 = 10 quilts from trade.

Dominique's gains 70 - 60 = 10 carpets and 110 - 100 = 10 quilts from trade.