3. Comparative advantage and gains from trade Consider two neighboring island countries called Dolorium and Contente. They each have 4 million labor hours available per month 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 Country Dolorium Contente Jeans Rye (Pairs per hour of labor) (Bushels per hour of labor) 16 10 Initially, suppose Contente uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rye, while Dolorium uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, Dolorium produces 12 million pairs of jeans and 16 million bushels of rye, and Contente produces 5 million pairs of jeans and 30 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 is of rye. Therefore, advantage in the production of rye. of rye, and Contente's opportunity cost of producing 1 pair of jeans has a comparative advantage in the production of jeans, and has a comparative Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In million pairs per month, and the country that produces rye will produce this case, the country that produces jeans will produce million bushels per month.