The following table shows the hours of labor required to produce 1 unit of each commodity in each country: Apple Mango Germany 4 hours 4 hours Malaysia 3 hours 9 hours Which country has an absolute advantage in Apple? In Mango? Why? If trade takes place between the Germany and the Malaysia at a barter price of 1 Mango for 2 Apple (or 1 Apple for 1 /2 Mango), why does each country gain from trade? Explain.

(a) Suppose that, in the situation in Question 6, the Germany has 500 hours of labor available to it. Prior to trade, the country is using 300 of those labor hours to produce Mango and the remaining 200 labor hours to produce Apple. How much Apple and how much Mango will the Germany be producing in this pretrade situation?

( b ) Now suppose that the Germany enters into trade with the Malaysia at the previously indicated barter price of 1 Mango for 2 Apple (or 1 Apple for 1 /2 Mango). The Germany now devotes all of its labor hours to Mango production and hence produces 125 units of Mango and 0 units of Apple. Why is this so? Suppose that the country exports 40 Mango (and therefore receives 80 Apple in exchange) and keeps the remaining 85 Mango for its own consumption.