What is the capital-output ratio of this country

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In an application of the Harrod-Domar model, suppose the only final-goods industry in a country is the making of cotton shirts. The factories, machinery and warehouses used in production were purchased previously and are still worth $3 billion. Each year, 66,700 workers are employed in the production of shirts with annual salary and benefits of $15,000 per year. It costs $50 million for cotton fabric and other inputs, such as electricity, to be used in making the shirts. The country produces and sells 100 million shirts a year, at an average price of $15 per shirt.

What is the capital-output ratio of this country? Explain, using this example, how a country can have a capital/output ratio greater than 1.

Reference no: EM13739606

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