What implications does have for a countrys specialization

Reference no: EM13243889

1 Suppose that at current factor prices cloth is producedusing 40 hours of labor for each acre of land, and food is producedusing only 8 hours of labor per acre of land.

a. Suppose that the economy's total resources are 320hours of labor and 20 acres of land. Use a diagram and some algebrato determine the allocation of resources. (It doesn'tnecessarily have to be to scale.)

b. Say there is a bumper crop in births for some astrologicalreason, and the labor force increases 10% from 320 hours to 352hours. Amend the diagram and use similar algebra to figure out whathappens again

c. What implications does this have for a country'sspecialization in trade if before the population boom bothcountries had exactly the same amount of resources? Assume substitutability of factors and decreasing marginal productivity of both factors, as well as homogeneous preferences acrosscountries, and identical technologies across countries. Illustratethis idea with a graph.

Reference no: EM13243889

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