LABOR-INTENSIVE GOODS 10 a co 2 1 0 0 1 2 3 6 7 CAPITAL-INTENSIVE GOODS 8 Once trade begins, the price of labor in Tomczakistan 9 10 decreases New Production In Leightvania, the price of labor increases
Factor-
The fictional country of Tomczakistan is a nation that is relatively rich in capital resources. It can produce two types of goods, capital-intensive goods and labor-intensive goods. Tomczakistan’s production possibilities frontier (
Currently, Tomczakistan is closed to international trade and producing at the grey point (star symbol) labeled A on the graph. Suppose that Tomczakistan is going to trade with Leightvania, a country that is relatively rich in labor and was also previously closed to international trade.
On the following graph, use the green point (triangle symbol) to indicate which way Tomczakistan will adjust its production by placing it on one of the two black points (plus symbol). Dashed droplines will automatically extend to both
axes.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
