Question 1 Consider two countries - Country A and Country B - producing two goods - Good X and Good Y. Using all its resources, Country A can produce either 100X or 200Y. Using all its resources, Country B can produce either 100X or 500Y. State your word count where applicable. (a) Derive the absolute advantages and comparative advantages in the production of the goods. Solve for a mutually beneficial Terms of Trade. (Word limit: 300 words) (15 marks) (b) Consider the case of constant opportunity costs. Suppose Country A exports 50X in exchange for 150Y. Explain the patterns of trade, production and consumption bundles, and the gains from trade. Provide a diagram to illustrate, with Good X on the x-axis (horizontal axis). Would there be any gains from trade if instead, Country A exports 50X in exchange for 100Y? Explain with a diagram. (Word limit: 400 words) (30 marks) (c) Suppose now we consider the representation of the Hecksher-Ohlin (H-O) model. There is only partial specialisation in both countries. Through trade, 30X was exported by Country A for 90Y. The final consumption bundles are: Consumption bundle of Country A: (60X, 180Y) Consumption bundle of Country B: (60X, 400Y) Analyse the production bundles, patterns of trade, and explain the gains from trade. Provide a diagram to illustrate, with Good X on the x-axis (horizontal axis). Thereafter, explain two (2) limitations of the H-O model. (Word limit: 700 words) (55 marks)