There two countries: Aggicland and Spartan. Each country produces two products,

Question

There two countries: Aggicland and Spartan. Each country produces two products, books and T-shirts, by using its own labor resources. The tables below show the production possibilities of each country. Aggieland Spartan Book T-shirts Book T-shirts Production Production Production Production 1,000 2,000 3,000 6,000 4,000- 5,000 15,000 12,000 9,000 10,000 8,000 6,000 4.000 2,000 2.000 4,000 6,000 8,000 3,000 10,000 1. Productivity, Unit Labor Requirement, and Absolute Advantage Aggieland has 5,000 labor hours, and Spartan has 5,000 labor hours. How many units of books can one hour of labor produce in Aggieland? How many units of T-shirts can one hour of labor produce in Aggieland? How many units of books can one hour of labor produce in Spartan? How many units of T-shirts can one hour of labor produce in Spartan? How many hours of labor are required to produce one unit of book in Aggieland? How many hours of labor are required to produce one unit of T-shirts in Aggieland? How many hours of labor are required to produce one unit of book in Spartan? How many hours of labor are required to produce one unit of T-shirts in Spartan? Which country has an absolute advantage in producing books? Which country has an absolute advantage in producing T-shirts?

Explanation / Answer

Question 1

Aggieland has 5,000 labor hours.

Using all its labor hours, it can produce a maximum of 5,000 books or a maximum of 15,000 T-shirts.

Spartan has 5,000 labor hours.

Using all its labor hours, it can produce a maximum of 10,000 books or a maximum of 10,000 T-shirts.

(a)

One hour of labor can produce (5,000 books/5,000 labor hours) 1 unit of book in Aggieland.

(b)

One hour of labor can produce (15,000 T-shirts/5,000 labor hours) 3 units of T-shirts in Aggieland.

(c)

One hour of labor can produce (10,000 books/5,000 labor hours) 2 units of books in Spartan.

(d)

One hour of labor can produce (10,000 T-shirts/5,000 labor hours) 2 units of T-shirts in Spartan.

(e)

To produce 1 unit of book, Aggieland requires (5,000 labor hours/5,000 books) 1 hour of labor.

(f)

To produce 1 unit of T-shirt, Aggieland requires (5,000 labor hours/15,000 T-shirts) 0.33 hours of labor.

(g)

To produce 1 unit of book, Spartan requires (5,000 labor hours/10,000 books) 0.5 hours of labor.

(h)

To produce 1 unit of T-shirt, Spartan requires (5,000 labor hours/10,000 T-shirts) 0.5 hours of labor.

(i)

Using all the labor hours in production of books, Aggieland can produce 5,000 books while Spartan can produce 10,000 books.

So, Spartan has an absolute advantage in producing books.

(j)

Using all the labor hours in production of T-shirts, Aggieland can produce 15,000 T-shirts while Spartan can produce 10,000 T-shirts.

So, Aggieland has an absolute advantage in production of T-shirts.

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