What is the opportunity cost of product z for given country

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Reference no: EM131210938

You know the following information about labor productivity (units of output per hour of labor) in a country: A worker can produce 8 units of product V in one hour. A worker can produce 4 units of product Z in one hour.

a. With no international trade, what is the opportunity cost of product Z for this country?

b. The country now opens to free trade, and the equilibrium world price of product Z is 1.5 V/Z. In comparison with no trade, which product will the country shift toward producing more of?

c. For free trade with an equilibrium world price of product Z equal to 1.5 V/Z, is it possible that the labor productivities in the other country (the one that this country trades with) are 6 units of product V per labor hour and 6 units of product Z per labor hour? Why or why not?

Reference no: EM131210938

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