Labor-abundant country, produces only wheat and cloth

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Reference no: EM13146671

Suppose country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country, where the numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. ‘w' is the wage rate and ‘r' is the rental rate of land. Price of wheat = 1w + 2r Price of cloth = 2w + 1r According to the information given in Scenario 5.3 (a), which of the following statements is true? Answer Labor is used relatively intensively in the production of cloth. The inputs are used in the same proportion in producing both the commodities. The land to labor ratio in the production of cloth is higher than that in the production of wheat. The opportunity cost of producing cloth is higher than the opportunity cost of producing wheat in country A. .

Reference no: EM13146671

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