2. In a one-factor economy, you have the following information: Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign, has a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. a. Graph Home's & Foreign production possibility frontier. Specify the maximum quantity that can be produced from both goods. Find the absolute value of the slope. b. Compare the opportunity cost of apples in Home and in Foreign. c. If apples are sold at $9/unit and bananas are sold at $5/unit. Find the wages paid in Home to produce apples and bananas. d. Identify the good that Home should specialize in and why.
2. In a one-factor economy, you have the following information: Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign, has a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. a. Graph Home's & Foreign production possibility frontier. Specify the maximum quantity that can be produced from both goods. Find the absolute value of the slope. b. Compare the opportunity cost of apples in Home and in Foreign. c. If apples are sold at $9/unit and bananas are sold at $5/unit. Find the wages paid in Home to produce apples and bananas. d. Identify the good that Home should specialize in and why.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. In a one-factor economy, you have the following information: Home has 1,200
units of labor available. It can produce two goods, apples and bananas. The
unit labor requirement in apple production is 3, while in banana production it is
2. Foreign, has a labor force of 800. Foreign's unit labor requirement in apple
production is 5, while in banana production it is 1.
a. Graph Home's & Foreign production possibility frontier. Specify the maximum
quantity that can be produced from both goods. Find the absolute value of the
slope.
b. Compare the opportunity cost of apples in Home and in Foreign.
c. If apples are sold at $9/unit and bananas are sold at $5/unit. Find the wages paid
in Home to produce apples and bananas.
d. Identify the good that Home should specialize in and why.
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