The production possibilities frontiers in the figure to the right show how many

Question

The production possibilities frontiers in the figure to the right show how many bananas and coconuts you (Y) and your neighbor (N) can consume without trade. Suppose you are initially consuming 5 bananas and 4 coconuts and your neighbor is initially consuming 3 bananas and 9 coconuts. Now, suppose you and your neighbor specialize by each only producing the good for which you have a comparative advantage. You give your neighbor half of your production for half of what he produces. (Enter all responses as integers) If you trade with your neighbor, then you will have additional coconut(s) after the trade

Explanation / Answer

In case of comparative advantage, only one good will be produced by me and my neighbor on the basis of specialization.

Good produced by myself = 24 coconuts

Good Produced by my neighbor = 30 Bananas

Now, as per the statement mentioned in problem, half of the good produced will be shared with each other.

Then, after sharing,

Goods owned by myself = 12 coconuts and 15 bananas

Goods owned by my neighbor = 15 Bananas and 12 coconuts

Thus, Additional coconuts owned by myself after the exchange = 12 – 4 = 8 coconuts

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