1. Consider the economy of two countries: Ecuador (E) and Colombia(C) ini- tially not trading with each other. Each country has 1000 workers for pro- ducing bananas (B) and roses (R). An Ecuadorian worker can produce 10 roses or 25 bananas while a Colombian worker can produce 50 roses or 30 bananas. [30 points] (a) Calculate the opportunity cost of roses and bananas in Ecuador and Colombia. Which country has comparative advantage in roses and ba- nanas? [3 points] (b) Draw the production possibilities frontier for Ecuador and Colombia. What does the slope of the production possibilities frontier represent? Explain. [5 points] (c) When both countries open to trade, i. What pattern of trade would one expect? [3 points] ii. What do we know about the relative price of roses under free trade? [3 points] iii. How does allocation of workers across industries change after trade? [3 points] (d) Are Ecuadorian workers better off in terms of bananas and roses under free trade? Explain your answer. [6 points] (e) Is the wage in Ecuador higher than that in Colombia after opening to trade? Explain your answer. [7 points]