Assume there are only two countries and there is only one factor of production, labor. It takes 6 labor hours to produce 1 pound of beans and 2 labor hours to produce 1 pound of corn in China. It takes 4 labor hours to produce 1 pound of beans and 1 labor hour to produce 1 pound of corn in Germany.

1.  Which country has an absolute advantage in the production of corn?
 

2.  Which country has a comparative advantage in the production of corn?
 

Now assume there are 1000 labor hours available in each country and these hours are divided equally between producing beans and corn. Therefore, there are 500 labor hours available for producing beans and 500 labor hours for producing corn in each country. Therefore, before specialization and trade, total world production of beans and corn is 208.33 pounds and 750 pounds respectively.

Then Germany specializes in producing corn and exports 42 pounds of corn to China. China then becomes more specialized in the production of beans and trades with Germany. Assume a trading ratio of 3.5 pounds of corn to 1 pound of beans.

3. What is total world production of beans and corn after specialization and trade?