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Monday, February 13, 2012 |
Consider the production options of Costa Rica, a lesser developed country (LDC):
Costa Rica's Endowment:
| Capital (K) | 10 machines |
| Labor (L) | 10 workers |
Production information: Costa Rica produces two goods, steel and garments, using its labor and capital. The following table shows the inputs required for each type of factory:
| Good | Input requirements per factory | Value of output per factory | |
| K | L | ||
| Steel | 9 | 1 | $10,000 |
| Garments | 1 | 1 | $2,000 |
Option 1: Costa Rica specializes entirely in garments, which it can then export for steel.
| Number of factories | Total inputs employed | Value of total output (GNP) | ||
| K | L | |||
| Steel | 0 | 0 | 0 | $0 |
| Garments | 10 | 10 | 10 | $20,000 |
| Total | 10 | 10 | $20,000 | |
| Unemployment | 0 | 0 | --- | |
Option 2: Costa Rica decides to establish one domestic steel
producer.
To do:
(1) Enter the inputs used for steel production and the
resulting value of steel output
(2) Enter the number of garment factories that remain, and
the new input and output information for the garment industry.
(3) Fill in the bottom two rows of summary information.
| Number of factories | Total inputs employed | Value of total output (GNP) | ||
| K | L | |||
| Steel | 1 | |||
| Garments | ||||
| Total | ||||
| Unemployment | --- | |||