To calculate the comparative advantage and the potential gains from trade, we need to

determine the opportunity costs for each country. The opportunity cost represents the amount of
one good that must be given up to produce an additional unit of another good.
 Country A:
Opportunity cost of producing 1 Widget = 1 Doodad
 Country B:
Opportunity cost of producing 1 Widget = 0.5 Doodads
Since Country B has a lower opportunity cost of producing widgets, it has a comparative
advantage in widget production. On the other hand, Country A has a comparative advantage in
doodad production.
If each country specializes in producing the good in which it has a comparative advantage
and then trades with each other, they can achieve higher total output.
Country A can specialize in doodad production and allocate all its labor input (15
workers) to produce doodads. With specialization, Country A can produce 15 doodads.
Country B can specialize in widget production and allocate all its labor input (10
workers) to produce widgets. With specialization, Country B can produce 20 widgets.
If Country A trades some of its doodads with Country B for widgets, both countries can
benefit. Let's say they agree to trade 10 doodads for 15 widgets.
After the trade:
 Country A has 5 doodads and 15 widgets.
 Country B has 10 widgets and 10 doodads.
In total, there are 30 widgets and 10 doodads, which is a higher amount of each good
compared to what the countries could produce individually without trade.
Through specialization and trade, both countries can enjoy the benefits of increased output
and access to goods they have a comparative advantage in.