ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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 (
b. What country has the
c.) What is the pattern of specialisation and trade? Briefly explain your answer.
d. To the graphs you drew in point (a) add the CPF after free trade. Which country
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