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1. Consider the following scenario like discussed in class and your textbook. |n Neverland, one unit of labor can produce 25 computers or 25 bushels
1. Consider the following scenario like discussed in class and your textbook. |n Neverland, one unit of labor can produce 25 computers or 25 bushels of wheat. |n Atlantis. one unit of labor can make 30 computers or 50 bushels of wheat. Assume that computers and wheat are the only two goods in the wortd. [what is the purpose of this assu rnption?} a. What is Nevertand's opportunity cost of making a computer? What is Atlantis's opportunity cost of making a computer? b. What is Nevertand's opportunity cost of producing a bushel of wheat? What is Atiantis's opportunity cost of producing a bushel of wheat? c. Does Neverland have absolute advantage in producing anything? Explain d. Does Neverland have comparative advantage in producing anything? Explain. e. Does Atiantis have comparative advantage in producing anything? Explain. f. Is it possible for Nevertand to gain by trading with Atlantis? Explain. g. Is it possible for Atlantis to gain by trading with Atlantis? Explain. h. What are the limiting terms of trade. outside of which exchange between Nevertand and Atlantis will not occur? [These will be barter ratios. e.g. 2 computersfbushel of wheat.)
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