Consider Robinson Crusoe who lives alone on the island. He can produce two good eggs (good X) and yoghurt (good Y). The only input to the production of these goods is his labour. He works 12 hours per day and sleeps for 12 hours - there is no time to play - this is a very grim economy... Let Lx denote the amount of time devoted to producing eggs (good X) and Ly denote the amount of time devoted to producing yoghurt (good Y). Eggs are produced using the production technology X = 5√/Lx and yoghurt is produced using the production technology Y = 4Ly. His preferences for eggs and yoghurt are described by the indifference curves with marginal rate of substitution MRSXY = Y/X. a) What is the production possibility frontier (PPF) for this economy? Hint: find how much labour is required to produce x eggs and y yoghurts and then use the resource constraint that the total labour available is 12 hours. What is the slope of the PPF? Remember, it is called MRT.

Consider Robinson Crusoe who lives alone on the island. He can produce two good eggs (good X) and yoghurt (good Y). The only input to the production of these goods is his labour. He works 12 hours per day and sleeps for 12 hours - there is no time to play - this is a very grim economy... Let Lx denote the amount of time devoted to producing eggs (good X) and Ly denote the amount of time devoted to producing yoghurt (good Y). Eggs are produced using the production technology X = 5√/Lx and yoghurt is produced using the production technology Y = 4Ly. His preferences for eggs and yoghurt are described by the indifference curves with marginal rate of substitution MRSXY = Y/X. a) What is the production possibility frontier (PPF) for this economy? Hint: find how much labour is required to produce x eggs and y yoghurts and then use the resource constraint that the total labour available is 12 hours. What is the slope of the PPF? Remember, it is called MRT.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.4P

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