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

Country. Corn Jeans

(Bushels per hour of labor (Pairs per hour of labor)

Euphoria 8 32

Arcadia 12 24

Initially, suppose Arcadia uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans, while Euphoria uses 3 million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Euphoria produces 24 million bushels of corn and 32 million pairs of jeans, and Arcadia produces 12 million bushels of corn and 72 million pairs of jeans. 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 corn and jeans it produces.

Euphoria's opportunity cost of producing 1 bushel of corn is 1/2 pair, 1/4 pair, 2 pairs, or 4 pairsof jeans, and Arcadia's opportunity cost of producing 1 bushel of corn is 1/2 pair, 1/4 pair, 2 pairs, or 4 pairs of jeans. Therefore, Euphoria or Arcadia has a comparative advantage in the production of corn, and Arcadia or Euphoria has a comparative advantage in the production of jeans.

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 corn will produce ANSWER? millionbushels per month, and the country that produces jeans will produce ANSWER ? millionpairs 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 corn trades 26 million bushels of corn to the other country in exchange for 78 million pairs of jeans.

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 corn was 36 million bushels per month, and the total production of jeans was 104 million pairs per month. Because of specialization, the total production of corn has increased by ANSWER? million pairs per month. Because of specialization, the total production of corn has increased by ANSWER? millionpairs per month.

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

Calculate the gains from trade?that 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").

Euphoria Arcadia Corn Jeans Corn Jeans (Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions of pairs) Without Trade Production 24 32 12 72 Consumption 24 32 12 72 With Trade Production Trade action Consumption Gains from Trade Increase in Consumption