Question 1 (CLO 1, Marks 10):Assume that two countries having the production possibilities, Taiwan and India, of two goods, smartphones and PC, given a fixed number of resources. Assume further, that Taiwan produces 39 smartphones and 13 PC's with the fixed resources and India produces 48 smartphones and 24 PCs. Using principles of specialization and opportunity cost answer the following questions.

• Which country has the absolute advantage in smartphones, and which has the absolute advantage in PC? Calculate Taiwan opportunity cost of smartphones in terms of PC.
• If the two countries were to specialize and trade with one another, which country would import smartphones?
• Assume the countries decide to specialize and trade and settled on a trading price of 2.5 smartphones per PC.
• Which country would experience gains from trade? Why?
• Explain why there are limits to output and how these limits force economies to make tradeoffs in the context of the above scenario?