Country A has 27,000 units of labor and can produce 2 goods, manufactures and fo
ID: 2698606 • Letter: C
Question
Country A has 27,000 units of labor and can produce 2 goods, manufactures and food. A’s producers take 3 units of labor to produce one unit of manufactures and 9 units to produce one unit of food. Country B has 75000 units of labor and takes 6 units of labor to produce one unit of manufactures and 3 units to produce one unit of food. What is the price of manufactures in terms of food at which A and B would respectively supply manufactures? What would B export in Adam Smith’s world? What is the amount it could supply?
Explanation / Answer
A would supply 3 units of manufactures for one unit of food. B would supply one unit of manufactures for 2 units of food. B would export food and could supply 75,000/3= 25,000 units of it.