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Chnological Innovation in the Garment Production Sector. Given the Same Amount of Resources Zion Can Produce 250 Million Garments. the Production of Wheat Remains Same. I. What Is the Opportunity Cost of Producing

In: Business and Management

Submitted By timeschange123
Words 285
Pages 2
Suppose a hypothetical country Zion produces only wheat and clothing given the scarce resource that is land and labor. The production possibility curve of Zion is a straight line. The maximum number of wheat that can be produced is 1000 million bushels and the maximum amount of clothing that can be produced is 200 million garments.

a. Draw the production possibility frontier\curve and shade the production possibility set. Measure the garments along the vertical axis.
b. What is the equation of the production possibility frontier?
c. Suppose Zion is on the production possibility frontier.

i. What is the opportunity cost of producing garments? ii. What is the opportunity cost of wheat? iii. What is the marginal rate of transformation? How is it related to the opportunity cost?
d. Suppose now there is technological innovation in the garment production sector. Given the same amount of resources Zion can produce 250 million garments. The production of wheat remains same.
i. What is the opportunity cost of producing garments? ii. What is the opportunity cost of wheat? iii. What is the marginal rate of transformation?

3. (Continued from Question-2) Now suppose that Gaul is another country that produces garments and wheat. Given the resources Gaul can produce 500 million garments and 600 bushels of wheat.
a. What is Gauls’s opportunity cost of producing garments?
b. What is Gauls’s opportunity cost of producing 1 bushel of wheat?
c. Which country has the comparative advantage in the production of wheat?
d. Which country has the comparative advantage in the production of wheat?
e. What should be the range of the TOT for garment so that both the countries produce the good in which they have comparative...

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