The accompanying hypothetical production possibilities tables are for New Zealand and Spain. Each country can produce apples and plums.

New Zealand's Production Possibilities Table (Millions of Bushels)						Spain's Production Possibilities Table (Millions of Bushels)
	Production Alternatives						Production Alternatives
Product	A	B	C	D		Product	R	S	T	U
Apples	0	20	40	60		Apples	0	20	40	60
Plums	15	10	5	0		Plums	60	40	20	0

a. Plot the production possibilities data for each of the two countries separately. Show the trading possibilities lines for each nation if the actual terms of trade are 1 plum for 2 apples.

Instructions: (1) Use the tools provided 'PPC NZ' and 'PPC SP' (plot 4 points each) to draw the PPC curves. (2) Use the tools provided 'ToT' in each diagram (plot 4 points each) to draw the trading possibilities lines for each nation. To earn full credit, you must correctly plot all points for each line.

Referring to your graphs, answer the following:

Instructions: Enter your answers as whole numbers.

b. What is each countrys cost ratio of producing plums and apples?

New Zealand's cost of producing 1 plum(s).

Spain's cost of producing 1 plum(s).

c. Which nation should specialize in which product?

Suppose the optimum product mixes before specialization and trade were alternative B in New Zealand and alternative S in Spain.

d. What would be the gains from specialization and trade?

Gains = apple(s) and plum(s).