Suppose China can produce two goods, cloth and food and has three factors of production labor (L), capital (K) and Land (T for terrain). Food is produced using land and labor while cloth is produced using capital and labor, hence, labor is a mobile factor. Keeping in mind the Specific Factors Model, answer the following questions a) What are the production functions for cloth and food? b) Write down the wage equations for each sector and the slope of the production possibility frontier. c) Drive the production possibility frontier for China [hint 4 quarter diagram]
Suppose China can produce two goods, cloth and food and has three factors of production labor (L), capital (K) and Land (T for terrain). Food is produced using land and labor while cloth is produced using capital and labor, hence, labor is a mobile factor. Keeping in mind the Specific Factors Model, answer the following questions a) What are the production functions for cloth and food? b) Write down the wage equations for each sector and the slope of the production possibility frontier. c) Drive the production possibility frontier for China [hint 4 quarter diagram]
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.6P
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Suppose China can produce two goods, cloth and food and has three factors of production labor
(L), capital (K) and Land (T for terrain). Food is produced using land and labor while cloth is
produced using capital and labor, hence, labor is a mobile factor. Keeping in mind the Specific
Factors Model, answer the following questions
a) What are the production functions for cloth and food?
b) Write down the wage equations for each sector and the slope of the production
possibility frontier.
c) Drive the production possibility frontier for China [hint 4 quarter diagram]
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