Name Homework #2 Due: Sun, Feb 6, 11:59pm Read the directions carefully and answer all parts of each question. Write neatly; if I can't read it, it will be counted wrong. You may work in groups, but you must submit your own solution. Any submissions that are word-for-word identical will receive a score of 0. No late homework will be accepted under any circumstances. 1. Consider the countries of Scotland and Wales. In one month, Scotland can produce a maximum of 250 wheat or 200 com Wales can also maximize production of 250 wheat, but their maximum barley output is 350 a. Assuming each country devotes half of its resources to growing each crop, calculate the production level of each crop in each country and overall production. (3 pts.) b. Determine comparative advantage in each and show how you found this. (4 pts.) c. Calculate production levels in each country of each crop under specialization and also overall production. (3 pts.) d. How much of each crop was gained by specialization? (2 pts.) 2. Using bread, explain in two sentences or fewer the following: (2 pts. each) a. Income Effect b. Substitution Effect c Law of Diminishing Marginal Returns 3. What would be the initial effect of the following events in the market for gasoline? (2 pts. each) a. Price increase of oll b. Price decrease of gasoline c. Price decrease of Tesla automobiles d. Income decrease e. Price of gasoline expected to decrease 4. Consider the market for pasta. Assume that the price of wheat increases. a. What is the initial effect? (3 pts.) b. How does the market adjust? (5 pts.) c. What is the effect on equilibrium? (2 pts.) 5. Consider the market for pasta. Assume that the keto diet becomes more popular. a. What is the initial effect? (3 pts.) b. How does the market adjust? (5 pts.) c. What is the effect on equilibrium? (2 pts.) 6. What is the net effect on equilibrium of the events of 4 and 5? (2 pts.)