The following hypothetical production possibilities tables are for China and the United States. Assume that before specialization and trade the optimal product mix for China is alternative B and for the United States is alternative U.

China Production Possibilities
Product	A	B	C	D	E	F
Apparel	120,000	96,000	72,000	48,000	24,000	0
Chemicals (in tons)	0	24	48	72	96	120

U.S. Production Possibilities
Product	R	S	T	U	V	W
Apparel	40,000	32,000	24,000	16,0000	8,000	0
Chemicals (in tons)	0	16	32	48	64	80

a. Are comparative-cost conditions such that the two countries should specialize? Yes or No

If so, what product should each produce?

China should produce : Apparel or Chemicals

The United States should produce: Apparel or Chemicals

b. What is the total gain in apparel and chemical output that would result from such specialization?

Apparel:____ units.

Chemicals:_____ tons.

c. What are the limits of the terms of trade?

____ units of apparel for 1 ton of chemicals and ______ units of apparel for 2 tons of chemicals.

Suppose that the actual terms of trade are 1 unit of apparel for 1 unit of chemicals and that 16,000 units of apparel are exchanged for 24 units of chemicals. What are the gains from specialization and trade for each nation?

Select One:(The United States, or China) has a gain of ______ units of apparel.

Select One:(China, or The United States)has a gain of ______ tons of chemicals.