LO19-27. Suppose the two islands in Problem 4 agree that the terms of trade will be one

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LO19-27. Suppose the two islands in Problem 4 agree that the terms of trade will be one for one and exchange 10 pearls for 10 pineapples.

(a) If Alpha produced 6 pearls and 15 pineapples while Beta produced 30 pearls and 8 pineapples before they decided to trade, how many pearls would each be producing after trade?

Assume that the two countries specialize according to their comparative advantage.

(b) How much would the combined production of pineapples increase for the two islands due to specialization?

(c) How much would the combined production of pearls increase?

(d) What is the post trade consumption for each island?

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