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) In which good does Country X have a comparative advantage? (1 mark)с. 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 Country X receives 50 tons of pearl in exchange. (5 marks)

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