Suppose the two islands in Problem 2 agree that the terms of trade will be 1 ton of pineapples for 1 ton of pearls and that trade soon results in an exchange of 10 tons of pineapples for 10 tons of pearls.
1. If Alpha produced 6 tons of pearls and 15 tons of pineapples and Beta produced 30 tons pf pearls and 8 tons of pineapples before they decided to trade, how much would each be producing after trade became possible? Assume that the two countries specialize just enough to maintain their consumption of the item they export, and make sure each island trades the item for which it has a comparative advantage.
2. How much would the combined production of pineapples increase for the two islands due to trade?
How much would the combined production of pearls increase?
3. How could both islands produce and consume even more?