2. Below are hypothetical production possibilities tables for New Zealand and Spain. Each country can produce apples and plums. LO2 Referring to the tables, answer the following:

a. What is each country’s cost ratio of producing plums and apples?

b. Which nation should specialize in which product?

c. Suppose the optimal product mixes before specialization and trade are alternative B in New Zealand and alternative S in Spain and the actual terms of trade are 1 plum for 2 apples. What will be the gains from specialization and trade?