Consider two neighboring island countries called Bellissima and Euphoria. They each have 4 million labor hours available per month that they can use to produce jeans, rye, or a combination of both. The following table shows the amount of jeans or rye that can be produced using 1 hour of labor.

CountryJeansRye(Pairs per hour of labor)(Bushels per hour of labor)Bellissima510Euphoria416Initially, suppose Bellissima uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rye, while Euphoria uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, Bellissima produces 5 million pairs of jeans and 30 million bushels of rye, and Euphoria produces 12 million pairs of jeans and 16 million bushels of rye. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of jeans and rye it produces.

Bellissima's opportunity cost of producing 1 pair of jeans is2 bushels of rye, and Euphoria's opportunity cost of producing 1 pair of jeans is4 bushels of rye. Therefore,Bellissima has a comparative advantage in the production of jeans, andEuphoria has a comparative advantage in the production of rye.

Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producingonlythat good. In this case, the country that produces jeans will producemillionpairs per month, and the country that produces rye will producemillionbushels per month.

In the following table, enter each country's production decision on the third row of the table (marked "Production").

Suppose the country that produces jeans trades 13 million pairs of jeans to the other country in exchange for 39 million bushels of rye.

In the following table, select the amount of each good that each country exports and imports in the boxes across the row marked "Trade Action," and enter each country's final consumption of each good on the line marked "Consumption."

When the two countries did not specialize, the total production of jeans was 17 million pairs per month, and the total production of rye was 46 million bushels per month. Because of specialization, the total production of jeans has increased bymillionpairs per month, and the total production of rye has increased bymillionbushels per month.

Because the two countries produce more jeans and more rye under specialization, each country is able to gain from trade.

Calculate the gains from tradethat is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption").

Bellissima

Euphoria

JeansRyeJeansRye(Millions of pairs)(Millions of bushels)(Millions of pairs)(Millions of bushels)Without TradeProduction5301216Consumption5301216With TradeProductionTrade action ConsumptionGains from TradeIncrease in Consumption