Question

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 week, what will be each shop's gain from trade?

Answer 1

Answer:

They both are in a better position after trading in 10 units of each product.

Explanation:

Since both companies decided to specialized production, the answer is comparing the total products they have after trading (2nd scenario) against the initial situation where both companies produced the 2 products. In this case, mikhail's will have 90 carpets, and 90 quilts and dominque's will have 70 carpets and 110 quilts. Comparing with the 1st scenario (without trading) both companies are in a better position having 10 units more of each product, so the trade benefited both in absolute terms