Trade between North and South Korea was legalized in 1988, but is currently very limited. Assume, however, that Hyundai has 200 workers in a plant in North Korea just across the boundary with South Korea, where a “partner” plant with 200 workers is located. Using the numbers from Question, how much output can be produced if each plant carries out component production and assembly independently and no trade occurs? How much output can be produced if specialization according to comparative advantage occurs and how should labor be allocated in each plant?
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