The basic gains from trade

Example: The U.S. and Malawi

    For both countries to gain from trade, the items must trade at a rate between the trade-offs of the 2 countries. Here's why...
    If 12 garments traded for 1 PC, both countries would consider PCs to be expensive and would like to export (sell) PCs.
    If 4 garments traded for 1 PC, both countries would consider PCs to be cheap and would like to import (buy) PCs.

    So, if the US and Malawi trade with each other, they will trade garments and PCs at a rate between 5 and 10 garments per PC.
    Assume they agree to exchange 7 garments for each PC.
    The US would like to export PCs, since PCs sell for more garments in Malawi than they cost to make at home (the US gains from indirect production of garments).
    Malawi would like to export garments, since PCs cost fewer garments in the US than they cost to make at home (Malawi gains from indirect production of PCs).

To do: The left-hand table below has been completed showing the outcome for the U.S. of a production adjustment and trade with Malawi. Fill in the right-hand table to show the outcome for Malawi.

1. Row a illustrates specialization.
2. Row b illustrates exchange.
3. Row c illustrates the gains from trade when countries pursue specialization and exchange according to comparative advantage.