Jeans Scarcity and Opportunity Costs Rye (Pairs per hour of labour) (Kilograms per hour of labour) Bellissima 5 20 8 16 Dolorium Initially, suppose Bellissima uses 1 million hours of labour per week to produce jeans and 3 million hours per week to produce rye, while Dolorium uses 3 million hours of labour per week to produce jeans and 1 million hours per week to produce rye. Consequently, Bellissima produces 3 million pairs of jeans and 48 million kilograms of rye, and Dolorium produces 15 million pairs of jeans and 20 million kilograms 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 quantity of jeans and rye it produces. Bellissima's opportunity cost of producing one pair of jeans is 1/2 kilogram of rye, and Dolorium's opportunity cost of producing one pair of jeans is 1/4 kilogram of rye. Therefore, has a comparative advantage in the production of jeans and comparative advantage in the production of rye. has a Suppose that each country specialises entirely 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 pairs per week, and the country that produces rye will produce kilograms per week. In the table at the end of this problem, enter each country's production decision in the row labeled "Production." Suppose the country that produces jeans trades 18 million pairs of jeans to the other country in exchange for 54 million kilograms of rye. In the table at the end of this problem, select the quantity of each good that each country exports and imports in the boxes across the row labeled "Trade," and enter each country's final consumption of each good on the row labeled "Consumption." When the two countries did not specialise, the total production of jeans was 23 million pairs per week and the total production of rye was 58 million kilograms per week. Because of specialisation, the total production of jeans has increased by pairs per week, and the total production of rye has increased by kilograms per week. Because the two countries produce more jeans and more rye under specialisation, each country is able to gain from trade. Calculate the gains from trade-in this case, the amount by which each country has increased its consumption of each good relative to the quantities given in the first row of the table. In the table, enter this difference in the row labeled "Increase in consumption." Bellissima Dolorium Rye (Millions of pairs) (Millions of kilograms) Jeans Rye (Millions of pairs) (Millions of kilograms) Jeans 8 48 15 20 Without Trade Prod. and consumption With Trade Production Trade Consumption Gains from Trade Increase in consumption NA MO Grade It Now Save & Continue Continue without saving