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

Country Jeans Rye
(Pairs per hour of labor) (Bushels per hour of labor)
Arcadia 8 16
Euphoria 5 20

Initially, suppose Arcadia uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce rye, while Euphoria uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce rye. Consequently, Euphoria produces 15 million pairs of jeans and 20 million bushels of rye, and Arcadia produces 8 million pairs of jeans and 48 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.

(a) Arcadia's opportunity cost of producing 1 bushel of rye is of jeans, and Euphoria's opportunity cost of producing 1 bushel of rye is of jeans. Therefore, has a comparative advantage in the production of rye, and has a comparative advantage in the production of jeans.
(b) 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 rye will produce million bushels per month, and the country that produces jeans will produce million pairs per month.