For all questions, consider the following economy: Two countries, Malta (M) and Netherlands (N), can each produce only two products, avocados (A) and bananas (B). Production Possibilities curves for M and N are given by the following equations:

for Malta: A+2B=2000

for Netherlands: 4A+B=1600 Countries can freely trade with each other.

1) Which country has comparative advantage in production of avocados (Malta, Netherlands, both or neither)?

2) What is the opportunity cost of producing 1 ton of avocados in Netherlands?

3) If the price of avocados is $20/ton, what is the maximum possible equilibrium price of bananas?

4) What is the price of bananas if the price of avocados is $20/ton and Malta is the only country that benefits from trade?