Question

Suppose Malaysia's production possibilities include a maximum of 70 units of rice or 280 units of lumber, and Canada's production possibilities include a maximum of 140 units of rice or 140 units of lumber. Then suppose each country initially allocates 50% of its labor to producing each product.

a) Total production by the two countries equals
tons of rice and
ft3 of lumber.



b) Now suppose that Malaysia increases the labor it allocates to lumber by 10%. Its lumber production rises by
and its rice production falls by
.



c) If Canada reallocates its labor to increase its rice production by exactly the amount that Malaysia's rice production fell, by how much must its lumber production fall?
ft3



d) State the combined effects on total production of the reallocations in part b and c.



Total production of rice changes by
tons. (include a negative sign, if needed)

Total production of lumber changes by
ft3. (include a negative sign, if needed)

Answer 1

Initially, Malaysia and Canada produce a total of 105 units of rice and 210 units of lumber. After reallocating labor, Malaysia's lumber production increases by 28 units and rice production falls by 7 units, while Canada's lumber production decreases by 7 units. Overall, total rice production remains the same, and lumber production increases by 21 units.

Step-by-step explanation:

The question involves an analysis of the production possibilities and resource allocation for Malaysia and Canada, with each country producing rice and lumber. We will determine total production, the effect of reallocating labor, and combined effects on production.

Initially, both countries allocate 50% of labor to producing rice and lumber. Malaysia can produce a maximum of 70 units of rice or 280 units of lumber, whereas Canada can produce up to 140 units of rice or 140 units of lumber.

a) Initially, Malaysia produces 35 units of rice (50% of 70) and 140 units of lumber (50% of 280). Canada produces 70 units of rice (50% of 140) and 70 units of lumber (50% of 140). Therefore, total production by both countries equals 105 units of rice and 210 units of lumber.

b) If Malaysia reallocates an additional 10% of labor to lumber, its lumber production rises by 10% of the maximum 280 units which is 28 units and rice production falls by 10% of the maximum 70 units which is 7 units.

c) To increase rice production by the exact amount that Malaysia's fell (7 units), Canada must decrease lumber production. Since Canada's ratio of production is 1:1, it will reduce lumber production by 7 units to increase rice production by 7 units.

d) After the reallocations, the total production of rice remains unchanged (the increase in Canada’s production offsets the decrease in Malaysia’s). Thus, the change is 0 tons. The total production of lumber increases by the 28 units Malaysia gained, and decreases by the 7 units Canada lost, resulting in a net change of +21 ft3 of lumber.