Two countries produce two different items, root beer and cheese. The table below shows the amounts of each commodity that each country can produce with 600 units of factor inputs (productive units). Consumption in each country is equal to production that is, if trade is warranted, citizens need to receive at least as much root beer and cheese as they started with before trade. Given the following production levels, calculate the best possible trading scenario that maximizes global welfare. Remember each country has 600 productive units which they can use in any combination. Before trade, each country has allocated 50% of their productive units to each product. That is, before trade, Hokieland makes 150 gallons of root beer and 60 wheels of cheese. What should each country do if they trade? [be careful, you need to make at least as much after trade as you had before trade.] Explain your solution. Use this example to clearly explain the difference between Absolute and Comparative advantage.

e Hokieland Eagleland Root Beer 2 units per gallon | 4 units per gallon Cheese 5 units per wheel 8 units per wheel O