Question

Producing one yard of cloth requires 3 worker and 1 capital, while producing one pound of food requires 1 worker and 2 capital. Both countries have 720 workers; the United States has 480 capital, while ROW has 720. The price of food is always $24/pound; the price of cloth is $22/yard in the United States in autarky and $32/yard in both countries under free trade. The labor constraint is

a. QC + 2QF = 720
b. QC + 3QF = 720
c. 2QC + QF = 720
d. 3QC + QF = 720
e. none of the above

Answer 1

d. 3QC + QF = 720

Step-by-step explanation:

The labor constraint is the resource limitation in terms of labors. If labor resource is scarce then production schedule needs to prepared with special attention to utilize the resource in best possible way. The labor constraint is 3QC + QF = 720 for the ROW.