1. The countries of X and Y produce diamonds and pearls. The production possibilities scheduled below describes their potential output in tons per year: (14 marks)

a. What is the opportunity cost of diamonds for each country? (1 mark) b. What is the opportunity cost of pearls for each country? (1 mark) c. In which good does Country X have a comparative advantage? (1 mark) d. In which good does Country Y have a comparative advantage? (1 mark) e. Suppose Country X is producing and consuming at point B on its production possibilities curve and Country Y is producing and consuming at point C on its production possibilities curve. Construct a table to explain why both nations would benefit if they specialized in each good. (5 marks) f. Draw a graph and use it to explain how Country X and Country Y benefit if they specialize and Country X agrees to trade 50 tons of diamonds to Country Y and CountryX receives 50 tons of pearl in exchange. (5 marks)