Reference no: EM131825752

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

Country Corn Jeans

Dolorium 4 16

Contente 5 10

Initially, suppose Contente uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce corn and 1 million hours per week to produce jeans. Consequently, Dolorium produces 12 million bushels of corn and 16 million pairs of jeans, and Contente produces 5 million bushels of corn and 30 million pairs of jeans. 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 corn and jeans it produces.

Dolorium's opportunity cost of producing 1 bushel of corn is_________ of Jeans, and Contente's opportunity cost of producing 1 bushel of corn is ________ pairs of Jeans. Therefore _________ has a comparitive advantage in the production of Corn and __________ has a comparative advantage in the production of Jeans.

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 corn will produce ________ million bushels per week, and the country that produces Jeans will produce ____________ million pairs per week.

When the two countries did not specialize, the total production of corn was 17 million bushels per week, and the total production of jeans was 46 million pairs per week. Because of specialization, the total production of corn has increased by ________ million bushels per week, and the total production of Jeans has increased by _________ million pairs per week.