Question

Brenda is an excellent baker and Floyd has a plentiful farm. If Floyd trades eggs and butter to Brenda for some of Brendaâs bread and pastries. a) only Floyd is made better off by trade. b) only Brenda is made better off by trade. c) both Floyd and Brenda are made better off by trade. d) neither Floyd nor Brenda are made better off by trade.

Answer 1

c) both Floyd and Brenda

Step-by-step explanation:

If all economic agents engage in the trade of the goods they have comparative or absolute advantage in producing, they all gain from trade.

An economic agent has a comparative advantage in production if they produce at a lower opportunity cost when compared to other economic agents.

An economic agent has comparative advantage if they produce greater quantity of a good when compared to other economic agents.

Brenda has an advantage in baking while Floyd has an absolute advantage in farming. If Floyd trades eggs and butter to Brenda for some of Brendaâs bread and pastries, they both gain from trade.

I hope my answer helps you