Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Two countries, Marland and Teckana, can produce either clothing or food using all their available resources at constant opportunity cost. The table below shows the daily production of clothing or food in Marland and Teckana. Marland Teckana Clothing 120 80 Food 20 20 (a) Which country has the absolute advantage in producing food? Explain. (b) Which country has the comparative advantage in producing food? Explain using numbers. (c) Assume the two countries specialize based on their comparative advantage. If the two countries engage in trade and one unit of food is exchanged for 5 units of clothing, will these terms of trade be mutually beneficial? Explain.

Welfare analysis of the society is related to welfare economics. From the economic point of view former welfare economics refers to that subject which uses the techniques of microeconomics to analyse and evaluate the welfare at the economic or aggregate …