I. (14 points) Paraphrasing Tool | QuillBot Al https://quillbot.com The small neighboring island countries of Banu and Dari can produce two goods, wheat (food) and garments (clothing). Both countries possess exactly equal amounts of resources. A. With full-employment and efficient utilization of all its resources, Banu can produce 500 million bushels of wheat per year. Alternatively, Banu could devote all its resources to garments and produce 260 million per year - or it could produce any combination of wheat and garments lying on a straight line between these two extremes. Questions and Problems: 1. Draw the PPF for Banu (with wheat on the horizontal axis). 2. What is the opportunity cost of producing 260 million garments in Banu? (Give a specific numerical answer). - 3. What is the opportunity cost of producing each individual garment in Banu? (Give a specific numerical answer). B. Suppose that the country of Dari, by efficiently utilizing all its given quantity of resources (equal to that of Banu's) can produce 335 million bushels of wheat per year. If it devotes all its resources to garment production, it can produce 240 million per year. It could also produce any combination of the two goods lying on a straight line between the two extremes.2 1. Draw the PPF for Dari (with wheat on the horizontal axis). 2. What is the opportunity cost of producing 335 million bushels of wheat in Dari? (Give a specific numerical answer). 3. What is the opportunity cost of producing each individual unit (bushel) of wheat produced in this country? (Give a specific numerical answer). C. Does the principle of "increasing opportunity cost" hold in either of the two countries? Justify and explain briefly. D. Should specialization and trade take place between the two countries? If so, indicate clearly what the nature of trade should be (i.e., what each country should export and what it should import). Be sure to justify your answer. II. (12 Points) Answer both questions 1 and 2 presented below. 1 . Some years ago, there was a "cranberry scare" in the United States. In the Fall of the year, there were widespread stories that a cancer-causing chemical had contaminated cranberries. This affected consumers' attitudes and preferences for cranberries. Use your knowledge of demand and supply model to analyze this situation and answer the following questions: What probably happened to the equilibrium price of cranberries? What probably happened to the equilibrium quantity bought and sold that holiday season? Illustrate your answers with a well-labeled demand-supply graph. 2. Rent controls are often suggested as a method for keeping housing costs down. Explain how this type of price regulation affects the rental housing market. Use a well-labeled demand-supply model to illustrate and help explain your