Consider two neighboring island countries called Dolorium and Arcadia. They each have 4 million labor hours available per week that they can use to produce jeans, rye, or a combination of both. The following table shows the amount of jeans or rye that can be produced using 1 hour of labor.
Jeans (Pairs per hour of labor) Rye (Bushels per hour of labor)
Country Dolorium 4 16
Arcadia 6 12
Initially, suppose Arcadia uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce rye, while Dolorium uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce rye. Consequently, Dolorium produces 12 million pairs of jeans and 16 million bushels of rye, and Arcadia produces 6 million pairs of jeans and 36 million bushels of rye. Assume there are no other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of jeans and rye it produces.
Dolorium's opportunity cost of producing 1 pair of jeans is _____ of rye, and Arcadia's opportunity cost of producing 1 pair of jeans is _____ of rye. Therefore, _____ advantage in the production of jeans, and _____ has a comparative advantage in the production of rye.
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 jeans will produce _____ million pairs per week, and the country that produces rye will produce _____ million bushels per week.
