Consider the following two countries, Italy and Gemany.

Italy requires 2 hour of labour lo produce 1 itre of olive oil and 4 hours of labour to produce 1 car part;

Germany requires 4 hours of labour to produce 1 litre of olive oil and 1hours of labour to producel car part;

Suppose now each country has 1000 hours of labour to allocate between the production of olive oil and car parts.

When trade occurs between Italy and Gemany, the relative price price of olive oil over the price of car part) is 1.

What is the total gain from trade for Italy in terms of car part? (compare the total indirect output and direct Output). What is the total gain from trade for Gemany in terms of olive oil? (compare the total indirect output and direct output)