Consider two neighboring island countries called Felicidad 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.

Initially, suppose Contente uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rye, while Felicidad uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, Felicidad produces 12 million pairs of jeans and 16 million bushels of rye, and Contente 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.

Felicidad's opportunity cost of producing 1 pair of jeans is.............of rye, and Contente's opportunity cost of producing 1 pair of jeans is............of rye. Therefore,...........has a comparative 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, producingonlythat good. In this case, the country that produces jeans will produce.........millionpairs per month, and the country that produces rye will produce..........millionbushels per month.

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 14 million pairs of jeans to the other country in exchange for 42 million bushels of rye.

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 18 million pairs per month, and the total production of rye was 52 million bushels per month. Because of specialization, the total production of jeans has increased by............millionpairs per month, and the total production of rye has increased by............millionbushels per month.

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

\fWithout Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption Felicidad Contente Jeans Rye Jeans Rye (Millions of pairs) (Millions of bushels) (Millions of pairs) (Millions of bushels) 12 16 36 12 16 36 mm mm DD|DM m|m Felicidad's opportunity cost of producing 1 pair of jeans is 'I" of rye, and Contente's opportunity cost of producing 1 pair of jeans is '7 of rye. Therefore, '7 has a comparative advantage in the production ofjeans, and '7 has a comparative advantage in the production of rye