Suppose that Japan and Canada each have 1,000 production units available to them. With each unit, Japan can produce 3 bicycles or 6 books while Canada is able to produce either 8 bicycles or 2 books. When no trade takes place, Japan allocates 400 units to bicycles and 600 to books and Canada allocates 700 units to bicycles and 300 to books.
1. Provide a table showing total production for the two countries with no trade.
2. Provide a table that assumes total specialization. What is the effect on total?
Determine the two extreme prices that are possible for trade in this situation and whom does each extreme favor?