Suppose That: - Malaysia Requires 1 Hour of Labor to Produce 1

question 68

Essay

Suppose that:
- Malaysia requires 1 hour of labor to produce 1 pound of rice and 2 hours of labor to produce 1 pencil;
- Indonesia requires 2 hours of labor to produce 1 pound of rice and 3 hours of labor to produce 1 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.
I. In Malaysia, what are the marginal productivities of labor in rice and pencil production?
II. In Indonesia, what are the marginal productivities of labor in rice and pencil production?
III. What are the autarkic prices of rice and pencils in each country?
IV. In which product will each specialize?
V. What happens to wages in each country when trade occurs?

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Definitions:

Uterine Tubes

Also known as fallopian tubes, these are the structures that transport the ovum from the ovary to the uterus.

Ampulla

A widening or dilation in a tubular structure, such as the ampulla of Vater in the digestive system or the ampullae of the fallopian tubes.

Infundibulum

A funnel-shaped structure, often referring to the connection between the hypothalamus and the pituitary gland or the passageway in the female reproductive system leading to the fallopian tubes.

Testosterone

A primary male sex hormone responsible for the development of male secondary sexual characteristics.