Answered step-by-step\\ Question 1 // 1 hour of labour can produce 1 pound of yoghurt...
\\ Question 1 //
1 hour of labour can produce 1 pound of yoghurt
2 hours of labour can produce 1 yard of cloth
Yogurt = $5/pound
Cloth = $8/yard
Based on the information above, the economy will
Select one:
a. Specialise in the production of cloth because the relative price of cloth exceeds its opportunity cost in terms of yoghurt
b. Specialise in the production of yoghurt because the relative price of yoghurt is constant with the opportunity cost in terms of cloth
c. Specialise in the production of cloth because the relative price of cloth is constant with the opportunity cost in terms of yoghurt
d. Specialise in the production of yoghurt because the relative price of yoghurt exceeds its opportunity cost in terms of cloth
\\ Question 2 //
1 hour of labour can produce 1 pound of yoghurt
2 hours of labour can produce 1 yard of cloth
Yogurt = $5/pound increase to $6/pound
Cloth = $8/yard to $12/yard
Based on the information above, labour will
Select one:
a. Move from cloth to yoghurt
b. Remain in their own industry
c. Move to yoghurt first then cloth
d. Move from yoghurt to cloth
Answer & Explanation
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