In a one-factor economy, you have the following information: Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign, has a labor force of 800. Foreign’s unit labor requirement in apple production is 5, while in banana production it is 1. If apples are sold at $9/unit and bananas are sold at $5/unit. Find the wages paid in Hometo produce apples and bananas. Identify the good that Home should specialize in and why.

In a one-factor economy, you have the following information: Home has 1,200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign, has a labor force of 800. Foreign’s unit labor requirement in apple production is 5, while in banana production it is 1. If apples are sold at $9/unit and bananas are sold at $5/unit. Find the wages paid in Hometo produce apples and bananas. Identify the good that Home should specialize in and why.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.3P

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