Fill This Form To Receive Instant Help
Fill This Form To Receive Instant Help
Homework answers / question archive / An economy can produce leather using labor and capital and wheat using labor and land
An economy can produce leather using labor and capital and wheat using labor and land. The total supply of labor is 100. Given the supply of capital and land, the outputs of the two goods depend on labor input as follows:
Labor input of labor Output of leather Labor input of wheat Output of wheat
0 0 0 0
10 25 10 40
20 38 20 53
30 49 30 62
40 58 40 69
50 66 50 76
60 74 60 82
70 81 70 87
80 87 80 91
90 94 90 96
100 100 100 100
a. Graph the production possibility frontier (PPF) on the graph paper provided. (Make sure to draw the PPF so as to be able to calculate the opportunity cost of leather in terms of wheat. Do not graph a four-quadrant diagram, only the corresponding PPF.)
b. If the allocation of labor between the leather and wheat sectors, at the current production point, is 20 and 80 units respectively, what is the opportunity cost of leather in terms of wheat at that specific production point?
c. At the current production point, what should be the relative price of leather in terms of wheat? Why? Explain concisely in mathematical form based on the theory behind the specific factors model.
