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

Country	Jeans (Pairs per hour of labour)	Corn (Bushels per hour of labour)
Arcadia	8	16
Euphoria	5	20

Initially, suppose Arcadia uses 1 million hours of labour per week to produce jeans and 3 million hours per week to produce corn, while Euphoria uses 3 million hours of labour per week to produce jeans and 1 million hours per week to produce corn. Consequently, Arcadia produces 8 million pairs of jeans and 48 million bushels of corn, and Euphoria produces 15 million pairs of jeans and 20 million bushels of corn. 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 corn it produces.

a) Fill in the blank AND choose between available terms in the brackets in bold

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

ii) Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing onlythat good. In this case, the country that produces jeans will produce ______ million jeans per week, millionpairs per week, and the country that produces corn will produce ______ millionbushels per week.

b) In the following table, enter each country's production decision on the row of the table marked "Production."Suppose the country that produces jeans trades 18 million pairs of jeans to the other country in exchange for 54 million bushels of corn.In the following table, select the amount of each good that each country exports and imports in the boxes across the row marked "Trade," and enter each country's final consumption of each good on the line marked "Consumption."

Fill in the blanks.

i) When the two countries did not specialize, the total production of jeans was 23 million pairs per week, and the total production of corn was 68 million bushels per week. Because of specialization, the total production of jeans has increased by _______ millionpairs per week, and the total production of corn has increased by ________ millionbushels per week.

Because the two countries produce more jeans and more corn 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").

	Arcadia	Euphoria
	Jeans (Millions of pairs)	Corn (Millions of Bushels)	Jeans (Millions of pairs)	Corn (Millions of Bushels)
Without trade
Production	8	48	15	20
Consumption	8	48	15	20
With Trade
Production	_______?	_______?	_______?	______?
Trade	(Exports 18/Imports 18?)	(Exports 54/Imports 54?)	(Exports 18/Imports 18?)	(Exports 54/Imports 54?)
Consumption
Gains from Trade	_______?	_______?	_______?	_______?
Increase in consumption	_______?	_______?	_______?	_______?