Consider two neighboring island countries called Euphoria and Contente. They each bave 4 million labor hours available per month that they can use to produce com, 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 ols Country Euphoria Corn (Bushels per hour of labor) Jeans (Pairs per hour of labor) 20 Contente 16 Initially, suppose Contenite uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce Jeans, while Euphoria uses million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Euphonia produces 15 million bushels of corn and 20 million pairs of Jeans, and contento producen 8 million bushels of corn and 48 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 com and start produces Euphoria's opportunity cost of producing 1 bushel of corn is 4 pairs of jeans, and contente's opportunity cost of producing 1 bushel of comis 2 pairs of jeans. Therefore, Contente has a comparative advantage in the production of corn, and 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, producing only that good. In this case, the country that produces corn will produce 8 million bushels per month, and the country that produces jeans will produce 20 million pairs 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 18 million bushels of corn to the other country in exchange for 54 million pairs of jeans When the two countries did not specialize, the total production of corn was 23 million bushels per month, and the total production of jeans was 68 million pairs per month. Because of specialization, the total production of corn has increased by million bushels per month, and the total production of jeans has increased by million pairs per month Because the two countries produce more com 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 Contente Corn Jeans Corn Jeans (Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions of pairs) 15 20 48 15 20 48 Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption
