Alpha and Beta, two tiny islands in the Pacific, produce pearls and pineapples. The following production possibilities schedules describe their potential output in tons per year:

LO21-2 LO21-1 LO21-1 LO21-2 Alpha Beta Pearls Pineapples Pearls Pineapples 0 30 0 20 2 25 10 16 4 20 20 12 6 15 30 8 8 10 40 4 10 5 45 2 12 0 50 0

(a) Graph the production possibilities confronting each island.

(b) What is the opportunity cost of pineapples on each island (before trade)?

(c) Which island has a comparative advantage in pineapple production?

(d) Which island has a comparative advantage in pearl production?

Now suppose Alpha and Beta specialize according to its comparative advantage and trades.

If one pearl is traded for 1.5 pineapples,

(e) How many pearls would have to be exported to get 15 pineapples in return?

After this trade,

(f) What is Alpha’s consumption?

(g) What is Beta’s consumption?