Alpha and Beta, two tiny islands in the Pacific, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year:

ATTACHMENT IS BELOW

Suppose Alpha and Beta agree that the terms of trade will be one for one and exchange 10 pearls for 10 pineapples.

a. If Alpha produced 6 pearls and 15 pineapples while Beta produced 30 pearls and 8 pineapples before they decided to trade, how many pearls would each be producing after trade? Assume that the two countries specialize according to their comparative advantage.

(i) Alpha: ___ pearls
(ii) Beta: _ pearls

b. How much would the combined production of pineapples increase for the two islands due to specialization?
_ pineapples

c. How much would the combined production of pearls increase?
_ pearls

d. What is the post-trade consumption for each island?
Alpha consumes _ pearls and pineapples.
Beta consumes pearls and ____pineapples.

If Alpha produced 6 pearls and 15 pineapples, while B produced 30 pearls and 8 pineapples before the trade, we can calculate the opportunity cost for each island. For island Alpha, their opportunity cost will be:

6 pearls = 15 pineapples

1 pearl = 15/6 pineapples

1 pearl = 2.5 pineapples

Therefore, the opportunity cost of pearls for A is 2.5 pineapples

For island Beta, their opportunity cost will be:

30 pearls = 8 pineapples

1 pearl = 8/30 pineapples

1 pearl = 0.27 pineapples

Therefore, the opportunity cost of pearls for A is 0.27 pineapples

b)

It appears that A will increase production of pineapples from 15 pineapples to 25 pineapples, and due to their opportunity cost, will decrease pearl production from 6 pearls to 2 pearls

It appears that B will increase the production of pearls from 30 pearls to 40 pearls, and due to their opportunity cost, will decrease pineapple production from 8 pineapples to 4 pineapples.