Country A and B produce sunglasses and smart watches. In country A one worker can produce20 pairs of sunglasses or 10 smart watches at maximum per day. In country B one worker can produce 50 pairs of sunglasses maximum or 50 smart watches per day. There is initially notrade between the countries. In country A 10000 pairs of sunglasses and 5000 smart watchesare produced every day. In country B 25000 pairs of sunglasses and 25000 smart watches are produced every day. Both countries have 1000 workers each. Both countries intend to cooperateand start trading with each other.

1. Show the transformation curve of both countries in the initial situation without trade.
2. What does the transformation curve look like with optimal division of labor?
3. Assume both countries want to consume the same number of sunglasses as but now have the option to trade. Demonstrate the potential welfare gain through free trade