Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Chapter 4, Problem 2RQ
To determine
The implications of equilibrium for a competitive economy containing many regional markets.
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On the Edgeworth production box plot, what conditions must be met for an allocation to be on the production contract curve? Why is there a competitive equilibrium on the contract curve?
a) Suppose that in the production of computer software, the marginal rate of technical substitution between engineers and marketer is 5 for IBM and 3 for Microsoft. Explain why this outcome violates the condition for efficiency in production and how a voluntary exchange could make both companies better off.
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