Jack is producing at point J on PPFJ, and Stephen is...

Jack is producing at point J on PPF$_J$, and Stephen is producing at point S on PPF$_S$. Who gains from specialization and trade? Stephen's opportunity cost of producing a ton of grapes is ____ Jack's, so Jack ____ gain from specialization and trade with Stephen.

Transcript

00:01 So here we're given some information about allocations and preferences.

00:04 We're told that jim values one blueberry equal to three blackberry.

00:08 And john values the berries equally, one for one.

00:11 And jim starts off with all the blackberries, right? the key thing that you should notice here is whenever valuations are different, there's room for trade can be good, right? because if you don't value it at the same price i do or the same ratio i do, it must be the case that one of us would be better off if we reallocate it the goods.

00:38 And if one person is going to be better off, they can compensate the other person with part of their gains to make both sides better off.

00:46 And an example here, right, is to pick any number in between the two valuations, which will make people better up.

00:53 For example, suppose that we propose to trade one blueberry for two blackberries.

01:01 My assertion is that this is a good trade for both, right? right? let's think about it.

01:10 Jim values one blueberry for three blackberries, right? so from his perspective, one blueberry is worth three blackberries.

01:18 But if he can get a blueberry for only paying two blackberries for his perspective, that's a really good deal, right? so jim is willing to buy blueberries at this price, right? because his preferences that otherwise he would have to give, he values three blackberries equal to one blueberry.

01:47 So if he can get the blueberries for only two black berries, right, for less than his preferences, he's better off, right? john is willing to sell at this price, to sell blue at this price...

Question

Jack is producing at point J on PPF$_J$, and Stephen is producing at point S on PPF$_S$. Who gains from specialization and trade? Stephen's opportunity cost of producing a ton of grapes is Jack's, so Jack gain from specialization and trade with Stephen.

Question

Jack is producing at point J on PPF$_J$, and Stephen is producing at point S on PPF$_S$. Who gains from specialization and trade? Stephen's opportunity cost of producing a ton of grapes is ____ Jack's, so Jack ____ gain from specialization and trade with Stephen.

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Jack is producing at point J on PPF$_J$, and Stephen is producing at point S on PPF$_S$. Who gains from specialization and trade? Stephen's opportunity cost of producing a ton of grapes is Jack's, so Jack gain from specialization and trade with Stephen.