Suppose That: • Malaysia Requires an Hour of Labor to Produce a Produce

question 110

Essay

Suppose that:
• Malaysia requires an hour of labor to produce a pound of rice and 2 hours of labor to
produce a pencil;
• Indonesia requires 2 hours of labor to produce a pound of rice and 3 hours of labor
to produce a pencil;
• each country has 10,000 hours of labor to allocate between the production of rice
and pencils; and
• in autarky, Malaysia consumes 5,000 pounds of rice and 2,500 pencils.
• when trade occurs, the international price of rice becomes 3/5 pencils per pound of
rice.
A) In Malaysia, what are the marginal productivities of labor in rice and pencil
production?
B) In Indonesia, what are the marginal productivities of labor in rice and
pencil production?
C) What are the autarkic prices of rice and pencils in each country?
D) In which product will each specialize?
E) What happens to wages in each country when trade occurs?

• A) In Malaysia, what are the marginal productivities of labor in rice and pencil
• production?
• B) In Indonesia, what are the marginal productivities of labor in rice and
• pencil production?
• C) What are the autarkic prices of rice and pencils in each country?
• D) In which product will each specialize?
• E) What happens to wages in each country when trade occurs?

---

Definitions:

Monthly Payments

Regular amounts paid monthly, often related to loans or leases.

Compounded Monthly

The process where the interest earned on an investment is added to the principal, and future interest payments are then calculated on the new principal amount on a monthly basis.

Monthly Loan Payment

A fixed payment amount made by a borrower to a lender at a specified date each calendar month.

Facility

A physical or virtual space configured to serve a specific purpose, such as manufacturing, storage, or office work.