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Assume that there are only two countries: Home and Foreign, both producing hats and coats. These...

Assume that there are only two countries: Home and Foreign, both producing hats and coats. These two countries have identical demand, production technology, and resource endowment. Each country has 100 labor hours available of which it allocates equally to each industry. Let productivities be 8 coats/hr., and 25 hats/hr. The productivity for hats does not change with the quantity of output. On the other hand, when Home produces 750 or more coats, its productivity increases to 10 coats/hr. According to the New Trade Theory, Economies of Scale Model, what will be the world total production of hats?

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