(Solved): Suppose there exist two imaginary countries, Everglades and Denali. Their labor forces are each ca ...

Suppose there exist two imaginary countries, Everglades and Denali. Their labor forces are each capable of supplying four million hours per week that can be used to produce chinos, pistachios, or some combination of the two. The following table shows the amount of chinos or pistachios that can be produced by one hour of labor. produces 15 million pairs of chinos and 20 million pounds of pistachios, and Denali produces 8 million pairs of chinos and 48 million pounds of pistachios. 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 chinos and pistachios it produces. Everglades's opportunity cost of producing 1 pair of chinos is of pistachios, and Denali's opportunity cost of producing 1 pair of chinos is of pistachios. Therefore, has a comparative advantage in the production of chinos, and has a comparative advantage in the production of pistachios. 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 chinos will produce million pairs per week, and the country that produces pistachios will produce million pounds per week. In the following table, enter each country's production decision on the third row of the table (marked "Production"). Suppose the country that produces chinos trades 18 million pairs of chinos to the other country in exchange for 54 million pounds of pistachios. 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." 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 chinos 23 million pairs per was 68 Because the two countries produce more chinos and more pistachios 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").