1. Let suppose in the world there is two country, Country X and Country Y. In country X there is only one worker A

while on country Y the worker is B. And both can produce sugar and wheat. But the country B is specialized in producing

wheat and the other one in sugar. Suppose that the A and the B each work 40 hours a week and can devote this time

to growing sugar, raising wheat, or a combination of the both. The person A can produce a pound of sugar in 10 hours

and a pound of wheat in 20 hours. The B, who is more productive in both activities, can produce a pound of Sugar in 8

hours and a pound of meat in 1 hour.

(20 Marks)

(a) Draw the Production Possibilities Frontiers for both workers?

(b) Whose have absolute and comparative advantage?

(c) Why they move toward trade?

(d) Graphically shows the gain from trade.