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2. Consider a world consisting of two countries, Contincntia and lslandia. Each country has 500 units of labor. the only input. In Contincntia, it takes 5units of labor to produce a compmq and 10 units of labor to produce a unit of textiles. In lslandia, it takes l0 units of labor to
a computer and units of labor toproduee a unit of textiles. a. Sketch each country's production possibilities frontier. Label the vertical and horizontai
intercepts and the slopes. b. Whatis the opportunity cost of producing a computer in Continentia? Why? What is the
opportunity'c.ost of ptoduciné a unit df textiles in Contincntia? Why? What isthe opportunity cost of producing a computer in lslandia? Why? What is the opportunity cost
of producing a unit of textiles in Islandia? Why? c. In autarky,what would be the relative price of computers in Continenlia? \s\andia?
Why? d. Which country has a comparative advantage in producing which good? Why? e.lfContinentia and lslandia specialize according to comparative advantage, how many computers and how many units of textiles will Continentia produce? lslandia? Why?f. After several years of trade, Continentia and lslandia pass new laws stating that half of each country's labor force must be used in each industry. in otherwords, hail of Conu'nentia's labor must produce computers and half must produce textiles. The same is true in lslandia. Under the new laws, how many computersand how many units oi textiles will Continentia produce? Islandia? Why?
g. How big is the economic cost of the laws that restrict specialization and trade between