You are in charge of producing and distributing soccer balls on international markets. Each soccer ball has two main ingredients: an inner bladder (balloon) and an outer covering (cover). You manage two production facilities in Asia, each with 60 workers. Taking existing technologies and the number of workers as fixed resources, your goal is to ensure that production is as efficient as possible (i.e. that output is maximized, given all your workers). The following table summarizes how many balloons or covers each worker can produce per day.

Balloons Covers

China 100 200

Vietnam 200 200

Your task is to compare several production plans to determine the most efficient overall strategy. Given the number of workers in each plant, you must determine how many workers it takes to produce the relative number of balloons or covers in each plant. Then, determine how many complete soccer balls you can produce in a given day in Vietnam, how many you can produce in China, and how many you can produce in total. When you are ready with this information, answer the following questions to evaluate the possible production plans:

1. Plan A: Independent production and distribution. In this plan, each plant independently produces the maximum number of soccer balls (given the number of workers) for distribution. How many balls do you produce in each location? How many do you produce in total?
2. Plan B: The China facility only produces covers; the Vietnam facility only produces balloons. How many soccer balls do you produce in total?
3. Plan C: The China facility produces only balloons; the Vietnam facility produces only covers. How many soccer balls do you produce in total?
4. Which of the three production plans above is the best, and which is the worst?
5. Are there gains from trade for the firm?
6. Name three forces outside the model that increase the cost of restructuring your supply chain across the Chinese and Vietnamese plants. In terms of soccer balls, how much of a cost increase can you offset by the increase in efficiency?
7. In your planning, you realize that China lags behind the Vietnam facility in terms of absolute productivity in producing balloons. You consider an investment to realize the same productivity in China as in Vietnam when it comes to producing balloons. If this is the case, and both facilities can now produce 200 balloons, which of the plans - A, B or C - do you prefer? What do you conclude about relative technology differences and the gains from trade?