Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 16, Problem 12E
(a)
To determine
The production possibilities frontier.
(b)
To determine
The production possibilities frontier.
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Students have asked these similar questions
17. For a certain good the production function is given by the equation q = q²qc, where q is the
produced output in units of 1000 and qL and qc are the number of units of labour and of capital
invested in the production process. Assume that one unit of labour costs 10 units of money and one
unit of capital costs 5 units of money.
(a) Show on a graph which combinations (qL, qc) generate exactly 64 000 units of output. Put qL
on the horizontal axis of the graph and qc on the vertical axis.
(b) Explain how one can see on the graph of part a which combinations (qL, qc) allow to produce
64 000 units using a budget of exactly 100 units of money.
(c) Explain how one can see on the graph of part a which combinations (qL, qc) allow to produce
64 000 units in the cheapest possible way.
Suppose two economies Home (H) and Foreign (F) produce two goods, bread and wine, with only one production factor: labour. Production technology, expressed as marginal product of labour (MPL), is given in the following table:
Technologies expressed as MPL
Bread
Wine
Home
1/6
1/12
Foreign
1/4
1/2
Suppose that Home has 2400 units of labour and Foreign has 1800 units of labour.
a. ) Derive the Production Possibilities Frontier (PPF) and the Consumption Possibility Frontier (CPF) for Home and Foreign, with bread on the horizontal axis and wine on the vertical axis. What is the autarky equilibrium price of bred relative to wine in each country?
b.) What country has the absolute advantage in producing each good? What country has the comparative advantage in producing each good? Briefly explain the difference between these two concepts. Suppose both countries are now free to trade. The world relative price of bread is 1.
c. What is the pattern of specialisation and trade?…
Consider Robinson Crusoe who lives alone on the island. He can produce two goods
eggs (good X) and yoghurt (good Y). The only input to the production of these goods
is his labour. He works 12 hours per day and sleeps for 12 hours - there is no time to
play- this is a very grim economy...
Let Lx denote the amount of time devoted to producing eggs (good X) and Ly denote
the amount of time devoted to producing yoghurt (good Y). Eggs are produced using
the production technology X = 5√Lx and yoghurt is produced using the
production technology Y = 4Ly.
His preferences for eggs and yoghurt are described by the indifference curves with
marginal rate of substitution MRSxy = Y/X.
a)
What is the production possibility frontier (PPF) for this economy? Hint:
find how much labour is required to produce x eggs and y yoghurts and then use the
resource constraint that the total labour available is 12 hours. What is the slope of the
PPF? Remember, it is called MRT.
Chapter 16 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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