Suppose Home and Foreign both only produce bikes and ropes for climbing. Precisely their production possibilities are characterized by the following table (which assumes that both countries use all of their 4 workers in the two production processes):

Workers Bikes	Workers Ropes	Home: Bikes	Home: Ropes	Foreign: Bikes	Foreign: Ropes
0	4	0	80	0	40
1	3	16	60	20	36
2	2	28	40	40	28
3	1	36	20	60	16
4	0	40	0	80	0

1. Calculate Home's marginal return from allocating one more worker to bike production at each level. Do the same for allocating one more worker to rope production. Are the marginal returns decreasing, constant or increasing as more workers are assigned to their production?

2. Calculate Home's marginal costs (opportunity cost) of allocating one more worker to rope and bike production at each worker allocation. Are the marginal costs decreasing, constant or increasing as more workers are assigned to their production? Why would that occur?

3. Draw the PPF of Home and Foreign in separate graphs. Indicate which points are technically efficient. Are there decreasing, constant or increasing returns?

4. Note that Foreign's PPF is the inverse of of Home's. Thus, their marginal costs of producing ropes and bikes are the inverse of Home's. Suppose the two country's open up to trade with each other. In whichproduct should each country specialize and why? in and what is total world production?

5. Now suppose that both country's preferred allocation is to consume equal amounts of bikes and ropes. Under the trade with full specialization, how many bikes and ropes can each country consume?

6. If the two countries weren't able to trade, what would their preferred (technically efficient) allocation be? Which regime do you think they prefer, trade or no trade?