Question

Consider two neighboring island countries called Dolorium and Content. They each have 4 million labor hours available per week that they can use to produce jeans, corn, or a combination of both. The following table shows the number of jeans or corn that can be produced using 1 hour of labor.

Country	Jeans	Corn
	(Pairs per hour of labor)	(Bushels per hour of labor)
Dolorium	4	16
Content	5	10

Initially, suppose Content uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Dolorium uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Dolorium produces 12 million pairs of jeans and 16 million bushels of corn, and Content produces 5 million pairs of jeans and 30 million bushels of corn. Assume no other countries are willing to trade goods, so, in the absence of trade between these two countries, each country consumes the number of jeans and corn it produces.

Dolorium's opportunity cost of producing 1 pair of jeans is_____ bushels of corn, and Contente's opportunity cost of producing 1 pair of jeans is_____bushels   of corn. Therefore,_____   has a comparative advantage in the production of jeans, and_____has a comparative advantage in the production of corn.

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 corn will produce_____million bushels 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 jeans trades 13 million pairs of jeans to the other country in exchange for 39 million bushels of corn.

 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 jeans was 17 million pairs per week, and the total production of corn was 46 million bushels per week. Because of specialization, the total production of jeans has increased by _______  million pairs per week, and the total production of corn has increased by _______  million bushels per week.

 Because the two countries produce more jeans and more corn 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").

Answer 1