(a) On the diagram below, use black ink to draw the production possibility set for a typical farmer from the north. side of the island. Given the equilibrium prices, will this farmer specialize in milk, specialize in wheat, or produce both goods? _______.___.__._._. Use blue ink to draw the budget that he faces in his role as a consumer if he makes the optimal choice of what to produce. (c) Suppose that peaceful Viking traders discover Veritas and offer to exchange either Wheat for milk or milk for wheat at an exchange rate of 1 unit of wheat for 3 units of milk. If the Isle of Veritas allows free trade with the Vikings, then this will be the new price ratio on the island. At this price ratio, would either type of farmer change his output? 32.4 (0) The Isle of Veritas has made it illegal to trade with the outside world. Only two commodities are consumed on this island, milk and wheat. On the north side of the island are 40 farms. Each of these farms can produce any combination of nonnegative amounts of milk and wheat that satises the equation m = 60 61:). On the south side of the island are 60 farms. Each of these farms can produce any combination of non-negative amounts of milk and wheat that satises the equation m = 40 2w. The economy is in competitive equilibrium and 1 unit of wheat exchanges for 4 units of milk. (b) On the diagram below, use black ink to draw the production possibility set for a typical farmer from the south side of the island. Given the equilibrium prices, will this farmer specialize in milk, specialize in wheat, or produce both goods? ___;____.___ Use blue ink to draw the budget that he faces in his role as a consumer if he makes the optimal, choice of what to produce. (d) On the rst of the two graphs above, use red ink to draw the budget for northern farmers if free trade is allowed and the farmers make the right choice of what to produce. On the second of the two graphs, use red ink to draw the budget for southern farmers if free trade is allowed and the farmers make the right choice of what to produce