Consider 2 hypothetical countries, Cuckoo Land (CL) and Lilliput Land (LL). Each of these countries can...

  

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Consider 2 hypothetical countries, Cuckoo Land (CL) and Lilliput Land (LL). Each of these countries can produce the following output with one unit of labor. The wage rates in CL are G 1000/unit of labor (Galleons) and wage rates in LL are C 90/unit of labor (Crescents). Current exchange rate is G20-C1. Output/unit of labor Goblets Magic Wands Cuckoo Land Lilliput Land 30 OR 20 60 OR 60 What are the opportunity costs of producing each of these goods in each country? (2 points) Based ONLY on the data in the table (i.e. ignoring wage rates), would you move ALL production to CL? If so, why? If not, would you move one product to CL? If so, which one, and why? (2 points) Now include the wage rates in your analysis. What would you recommend? If you recommended moving any production to CL, justify your decision. If you recommend not moving any production to CL, justify your decision by determining (3 points). i. The wage level at which it would be optimal to move some production a) b) c) to CL ii. The wage level at which it would be optimal to move all production to CL What are the limits to the exchange rate at which it makes sense to produce at least something in both countries? (3 points) d) Consider 2 hypothetical countries, Cuckoo Land (CL) and Lilliput Land (LL). Each of these countries can produce the following output with one unit of labor. The wage rates in CL are G 1000/unit of labor (Galleons) and wage rates in LL are C 90/unit of labor (Crescents). Current exchange rate is G20-C1. Output/unit of labor Goblets Magic Wands Cuckoo Land Lilliput Land 30 OR 20 60 OR 60 What are the opportunity costs of producing each of these goods in each country? (2 points) Based ONLY on the data in the table (i.e. ignoring wage rates), would you move ALL production to CL? If so, why? If not, would you move one product to CL? If so, which one, and why? (2 points) Now include the wage rates in your analysis. What would you recommend? If you recommended moving any production to CL, justify your decision. If you recommend not moving any production to CL, justify your decision by determining (3 points). i. The wage level at which it would be optimal to move some production a) b) c) to CL ii. The wage level at which it would be optimal to move all production to CL What are the limits to the exchange rate at which it makes sense to produce at least something in both countries? (3 points) d)

Answer rating: 100% (QA)

c Since opportunity cost for magic wands is 15 goblets in CL The optimal rate to produce ... View the full answer