a)
To ascertain:The
a)
Answer to Problem 10.6P
The production possibility curve for region A
The production possibility curve for region B
Explanation of Solution
To calculate the production possibility curves for region A, consider the following production
function for region A:
Here, Ix, is the labor allocated in the production of good x and I, is the labor allocated in the
production of good y
The total amount of labor available to region A is 100, that is,
From the production function, compute the value of Ixand Iy, as follows:
Now, substitute the value of Ix, and Iy, in the equation of total available labor and compute the
production function as follows:
Hence, the production for region
The PPF curve for region A is shown below:
In this graph the vertical axis shows production of good y and horizontal axis shows production of good x.
To calculate the production possibility curves for region B, consider the following production
function for region B:
Here, Ixis the labor allocated in the production of good x and Iyis the labor allocated in the
production of good y .
The total amount of labor available to region A is 100, that is,
From the production function, compute the value of Ix and Iyas follows:
Now, substitute the value of Ix and Iy and in the equation of total available labor and compute theproduction function as follows:
Hence, the production of region B is
The PPF curve for region B is shown below:
In the above graph, the vertical axis shows the production of good y and the horizontal axisshows the production of good x.
Introduction: Production possibilities of frontier is referring to specify the highest production combination of two products or services by the fixed amount of investment.
b)
To ascertain:conditions behind work allotted in region A and B.
b)
Answer to Problem 10.6P
The condition must hold for production allocation in country R between regions is
Explanation of Solution
To allocate the production efficiently in a region, the rate of production transformation (RPT) mustbe equal to the marginal rate of substitution (MRS).
Mathematically, the following condition musthold:
To allocate the production of two goods efficiently in the region A, the following condition musthold:
Hence, the rate of production transformation (RPT) in region A is
To allocate the production of two goods efficiently in region B, the following condition must hold:
Hence, the rate of production transformation (RPT) in region B is
To achieve the production
Hence, the condition must hold for production allocation in country R between regions is
Introduction: The marginal rate of production transformation is can be described as number of quantity of product that inevitable in order to attain a unit of another product.
c)
To ascertain:production possibility curve for a country.
c)
Answer to Problem 10.6P
The PPF for a country R is shown below:
Explanation of Solution
To determine the combined PPF for a country R,
first, calculate the combine production function asfollows:
Region A
Region B
Equate the Ix , and Iy , as follows:
Combine production function is shown below:
Thus, the combined PPF is
The total output of x is 12. Substitute the value of x in the above combined PPF and calculate the
output of y as follows:
Hence, the total output of y produced in a country is 9
The PPF for a country is shown below:
Introduction: Production possibilities of frontier is referring to specify the highest production combination of two products or services by the fixed amount of investment.
d)
To ascertain:production possibilities frontier for whole country.
d)
Answer to Problem 10.6P
If the labor is mobile within the country the production can be increased by allocating the resources in the favor of the more productive region.
Explanation of Solution
The PPF for the whole country can be developed for the whole country in the same way the PPF has been calculated for country R with two regions
If the labor is mobile within the country the production can be increased by allocating the resources in the favor of the more productive region.
Introduction: Production possibilities of frontier is referring to specify the highest production combination of two products or services by the fixed amount of investment.
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Chapter 10 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
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