Fill in the blanks

3. Gains from trade Suppose there exist two imaginary countries, Sequoia and Denali. Their labor forces are each capable of supplying four million hours per day that can be used to produce shorts, almonds, or some combination of the two. The following table shows the amount of shorts or almonds that can be produced by one hour of labor. Shorts Almonds Country (Pairs per hour of labor) (Pounds per hour of labor) Sequoia 5 20 Denali 8 1 6 Suppose that initially Denali uses 1 million hours of labor per day to produce shorts and 3 million hours per day to produce almonds, while Sequoia uses 3 million hours of labor per day to produce shorts and 1 million hours per day to produce almonds. As a result, Sequoia produces 15 million pairs of shorts and 20 million pounds of almonds, and Denali produces 8 million pairs of shorts and 48 million pounds of almonds. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of shorts and almonds it produces. Sequoia's opportunity cost of producing 1 pair of shorts is 1/4 pound Y of almonds, and Denali's opportunity cost of producing 1 pair of shorts is 1/2 pound V ofalmonds. Therefore, Sequoia V has a comparative advantage in the production of shorts, and Denali V has a comparative advantage in the production of almonds. 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 shorts will produce |:] million pairs per day, and the country that produces almonds will produce |:] million pounds per day. In the following table, enter each country's production decision on the third row of the table (marked \"Production'Q. Suppose the country that produces shorts trades 18 million pairs of shorts to the other country in exchange for 54 million pounds of almonds. 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 nal consumption of each good on the line marked \"Consumption. \" When the two countries did not specialize, the total production of shorts was 23 million pairs per day, and the total production of almonds was 68 million pounds per day. Because of specialization, the total production of shorts has increased by |:] million pairs per day, and the total production of almonds has increased by|:] million pounds per day. Because the two countries produce more shorts and more almonds 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 rst row of the table. In the following table, enter this difference in the boxes across the last row (marked \"Increase in Consumption\"). Sequoia Denali Shorts Almonds Shorts Almonds Sequoia Denali Shorts Almonds Shorts Almonds (Millions of pairs) (Millions of pounds) (Millions of pairs) (Millions of pounds) Without Trade Production 15 20 8 48 Consumption 15 20 8 48 With Trade Production Trade action Exports 18 Imports 54 V Exports 18 Imports 54 Consumption Gains from Trade Increase in Consumption