Let us see what the various lines in the diagram represent. We have the production possibility frontier (PPF) of computers and shoes as a concave curve (passing through B and C). The indifference curve U1 is tangent to the PPF at the point B, and hence, point B represents the no-trade Equilibrium, where the level of utility derived is U1. Now, if the country opens up to trade, the budget line's slope changes in accordance with the change in prices. The new budget line is the line segment passing through A and C. The relative price of computers has hence increased, since the slope of the budget line has increased. Now, the country will optimize with respect this new budget line, and not the PPF. Hence, in a way, the consumption possibilities have expanded, with the new consumption set being all points on or below this budget line. The PPF is a subset of this new Consumption set. It must be noted that without trade, the PPF was itself the consumption set, because the country could only consume from what it produced itself, but now, exchange can happen at the world prices and the possibilities for consumption have expanded. The indifference curve U2 is tangential to the new budget line at A, and hence optimum consumption Equilibrium with trade is A, where the utility derived is U2. The Equilibrium without trade was B where the utility was U1. Since U2 is a higher Indifference Curve than U1, the utility derived at point A is higher than that at point B, and hence, we can say that the nation has indeed gained from trade and has a higher standard of living.