Glass 100- Sand (K) 0 Labor(L) 100 0 Concrete 0 0 Labor(L) 100 Sand (K) 100 Suppose that the Italian economy produces two goods: Glass and Concrete. Both goods are produced using Workers (L) and Sand (K). The graphs below show allocations of L. and K to the two industries. Solid Orange curves represent Glass isoquants, while dotted Blue curves represent Concrete isoquants. A) Sketch the production contract curve for this economy. Explain what this represents in words. B) Draw an approximation of the production possibilities frontier for this economy. Explain any curvature or kinks (or lack thereof).
Glass 100- Sand (K) 0 Labor(L) 100 0 Concrete 0 0 Labor(L) 100 Sand (K) 100 Suppose that the Italian economy produces two goods: Glass and Concrete. Both goods are produced using Workers (L) and Sand (K). The graphs below show allocations of L. and K to the two industries. Solid Orange curves represent Glass isoquants, while dotted Blue curves represent Concrete isoquants. A) Sketch the production contract curve for this economy. Explain what this represents in words. B) Draw an approximation of the production possibilities frontier for this economy. Explain any curvature or kinks (or lack thereof).
Chapter13: General Equilibrium And Welfare
Section: Chapter Questions
Problem 13.6P
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Transcribed Image Text:Glass
100-
Sand (K)
0
Labor(L)
100
0
Concrete
0
0
Labor(L)
100
Sand (K)
100
Transcribed Image Text:Suppose that the Italian economy produces two goods: Glass and Concrete. Both goods are produced using Workers (L)
and Sand (K). The graphs below show allocations of L. and K to the two industries. Solid Orange curves represent Glass
isoquants, while dotted Blue curves represent Concrete isoquants. A) Sketch the production contract curve for this
economy. Explain what this represents in words. B) Draw an approximation of the production possibilities frontier for this
economy. Explain any curvature or kinks (or lack thereof).
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