Q. Plot production possibilities data for each of two countries separately. Referring to your graphs, answer following:
(a) Illustrate what is each country's cost ratio of producing plums and apples.
(b) Which nation should specialize in which product?
(c) Explain how trading possibilities lines for each nation if actual terms of trade are 1 plum for 2 apples.
(d) Suppose optimum product mixes before specialization and trade were alternative B in New Zealand and S in Spain. Illustrate what would be gains from specialization and trade?