Labour

[Chandrani]

In an economy where all commodities are produced with labour alone, 0.5 unit of labour is required to produce a unit of commodity A and 1 unit of labour to produce a unit of commodity B. If the international price of B is 2.5 units of A (and unaffected by how much the economy trades), and if the total amount of labour in the economy is 100 units, how much of the commodities will the economy produce?

(a) 200 units of A, 0 units of B
(b) 57.14 units of A, 71.04 units of B
(c) 57.14 units of B, 71.04 units of A
(d) 0 units of A, 100 units of B

[benhur]

i think d ans will be option d)
0 units of A and 100 units of B

to produce 2.5 amount of A,d economy requires 2.5X0.5 amount of labor ie 1.25 amount of labor..but wit dis 1.25 labor,we can produce more dan 1.25 unit of B..and since 1.25 unit of B is of greater value dan 2.5 unit of A(since price of 1B =price of 2.5 A)..d economy produces only B..