Question

Take a Test-riny s 201 w2019 iriny Mo 110120 10 bananas and 4 coconuts. each only producing the good for which you have a

Answer 1

Initial production of mine is 15 bananas and 2 coconuts.
Initial production of my neighbor is 10 bananas and 4 coconuts.

Now each one has decided to capitalize on comparative advantage so I am producing only bananas while my neighbor decided to have only coconuts.

After specialization, we have 30 bananas and 24 coconuts in total. We both have traded half of our production with each other.
It means I have given 15 bananas in exchange for 12 coconuts.

As a result, I have no additional banana but 10 additional coconuts for consumption after the trade.

On the other hand, my neighbor has 5 additional bananas and 8 additional coconuts after the trade.

Clearly, trade has made both of us better off.
Please note that neighbor has more to gain in this transaction because of the exchange ratio of banana and coconut.