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Suppose you work for Lincoln farms, a Nebraska based company that produces two goods: Fertilizers and Pesticides. These two goods are produced locally but
Suppose you work for Lincoln farms, a Nebraska based company that produces two goods: Fertilizers and Pesticides. These two goods are produced locally but exported to several firms in Guyana which uses both goods in their production of Agricultural goods. Suppose further that due to recent policy changes that have to do with waste disposal and pollution, producing these two goods in Nebraska is substantially more expensive, so much so that the bosses at your company are considering moving the production of these goods to two potential countries: Panama and Benin Republic. Upon recalling that you had mentioned during your job interview that you had taken an International Economics class in college, they call on you to advise them on the best way to approach this. You are provided the following information from the company's research team. For Panama: Total available labor supply: 140 Million Labor hours Total available Capital supply: 70 Million units Benin Republic: Total available labor supply: 30 Million Labor hours Total available Capital supply: 6 Million Units In both countries, technology levels are the same and based on the level of technology, in the production of Pesticides, the ratio of labor employed to capital used is and in the production of Fertilizer, the ratio of labor employed to capital used is 2:1. List of companies and quantities of each good being supplied by your company in Guyana Company Name Edstrand Limited Ruamba Global Russell Conglomerate Senior Enterprises (in millions of tons) CEO Samuel Edstrand Yein Ruamba Bryant Russell Nicholas Senior Quantity Of Fertilizer 68 45 82 309 Quantity Of Pesticide 124 96 312 290 Given that your company can still fulfill its obligations to the firms in Guyana without paying the extra costs associated with producing in Nebraska should they choose to produce in either Panama or Benin Republic or both, you have been asked to answer the following questions that cause upper management some degree of concern.
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