Question

Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could:
a. benefit Steve, but not Tom.
b. benefit neither Steve nor Tom.
c. benefit Tom, but not Steve.
d. benefit both Steve and Tom.

Answer 1

Answer:

D. Benefit both Steve and Tom

Explanation:

As Tom produces baseball gloves and baseball bats. Steve also produces baseball gloves and baseball bats, but Tom is better at producing both goods. In this case, trade could benefit both Steve and Tom. The basic logic behind this answer is that, although Steve is not better at producing baseball gloves and bats but still can compete with Tom, where Tom's better quality products will encourage Steve in order to produce bit better quality in order to remain him in the market and competition. On the other hand, when Steve is not producing much quality products, this will give more competitive advantage to  Tom, which definitely help him in earning more profits and loyal customers, therefore, in this cycle, both Steve and Tom will get benefit.