(c) Let's assume that both countries fully specialize in the sectors they have com- parative advantage, and then trade with each other. Propose a trade scenario where both countries can be better off by trading with each other. Plot your trade scenario on the graph that you drew in part (a). (10 pts) (d) According to your trade scenario, what is the relative price of avocado to price of cigar? (4 pts) (e) Under which interval of relative prices will there be gains from trade? (Hint: relative prices under which both countries specialize in the sectors they have com- parative advantage) (4 pts) (4 pts) Extra credit question 1: Propose a trade scenario where both countries would be worse off by trading with each other. This would be hypothetical and trade actually would not occur, since it makes either one of or both countries worse off.) 3. (Total 28 pts) Suppose that Mexico and Cuba produce two goods, avocado and cigar using labor as the only factor in production. Mexico is endowed with 300 workers and Cuba is endowed with 100 workers. The productivity per worker schedule is given for both countries on the following table. Answer the following questions. Avocado Cigar (unit per worker) (unit per worker) Mexico 50 40 Cuba 20 30 (a) Plot the production possibility frontier of both countries on separate graphs. La- bel the maximum number of avocado and cigar that can be produced (i.e. y- intercept and x-intercept). (Put avocado on the y-asis and cigar on the 2-tis and ) (4 pts) (b) Find the opportunity costs of Mexico and Cuba in avocado and cigar production Which country has comparative advantage in avocado and cigar production? (6 pts) (c) Let's assume that both countries fully specialize in the sectors they have com- parative advantage, and then trade with each other. Propose a trade scenario where both countries can be better off by trading with each other. Plot your trade scenario on the graph that you drew in part (a). (10 pts) (d) According to your trade scenario, what is the relative price of avocado to price of cigar? (4 pts) (@) Under which interval of relative prices will there be gains from trade? (Hint: relative prices under which both countries specialize in the sectors they have com- parative advantage) (4 pts) . (4 pts) Extra credit question 1: Propose a trade scenario where both countries would be worse off by trading with each other. (This would be hypothetical and trade actually would not occur, since it makes either one of or both countries worse off.) (c) Let's assume that both countries fully specialize in the sectors they have com- parative advantage, and then trade with each other. Propose a trade scenario where both countries can be better off by trading with each other. Plot your trade scenario on the graph that you drew in part (a). (10 pts) (d) According to your trade scenario, what is the relative price of avocado to price of cigar? (4 pts) (e) Under which interval of relative prices will there be gains from trade? (Hint: relative prices under which both countries specialize in the sectors they have com- parative advantage) (4 pts) (4 pts) Extra credit question 1: Propose a trade scenario where both countries would be worse off by trading with each other. This would be hypothetical and trade actually would not occur, since it makes either one of or both countries worse off.) 3. (Total 28 pts) Suppose that Mexico and Cuba produce two goods, avocado and cigar using labor as the only factor in production. Mexico is endowed with 300 workers and Cuba is endowed with 100 workers. The productivity per worker schedule is given for both countries on the following table. Answer the following questions. Avocado Cigar (unit per worker) (unit per worker) Mexico 50 40 Cuba 20 30 (a) Plot the production possibility frontier of both countries on separate graphs. La- bel the maximum number of avocado and cigar that can be produced (i.e. y- intercept and x-intercept). (Put avocado on the y-asis and cigar on the 2-tis and ) (4 pts) (b) Find the opportunity costs of Mexico and Cuba in avocado and cigar production Which country has comparative advantage in avocado and cigar production? (6 pts) (c) Let's assume that both countries fully specialize in the sectors they have com- parative advantage, and then trade with each other. Propose a trade scenario where both countries can be better off by trading with each other. Plot your trade scenario on the graph that you drew in part (a). (10 pts) (d) According to your trade scenario, what is the relative price of avocado to price of cigar? (4 pts) (@) Under which interval of relative prices will there be gains from trade? (Hint: relative prices under which both countries specialize in the sectors they have com- parative advantage) (4 pts) . (4 pts) Extra credit question 1: Propose a trade scenario where both countries would be worse off by trading with each other. (This would be hypothetical and trade actually would not occur, since it makes either one of or both countries worse off.)