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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

An economy consists of three workers: Larry, Moe, and Curly. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Larry can either mow one lawn or wash one car; Moe can either mow one lawn or wash two cars; and Curly can either mow two lawns or wash one car.

a. Calculate how much of each service is produced under the following circumstances, which we label A, B, C, and D:

• All three spend all their time mowing lawns. (A)

• All three spend all their time washing cars. (B)

• All three spend half their time on each activity. (C)

• Larry spends half his time on each activity, while Moe only washes cars and Curly only mows lawns. (D)

b. Graph the production possibilities frontier for this economy. Using your answers to part a, identify points A, B, C, and D on your graph.

c. Explain why the production possibilities frontier has the shape it does.

d. Are any of the allocations calculated in part a inefficient? Explain.

Sub part (a):

To determine

Production possibility frontierof quantity of car washed and quantity of lawns mowed.

Explanation

The total services produced in different situation are shown below:

A (All three spend their whole time mowing lawns): 40 lawns were mowed and 0 car was washed.

B (All three spend their whole time washing cars): 0 lawns was mowed and 40 cars were washed...

Sub part (b):

To determine

Production possibility frontierof quantity of car washed and quantity of lawns mowed.

Sub part (c):

To determine

Production possibility frontierof quantity of car washed and quantity of lawns mowed.

Sub part (d):

To determine

Production possibility frontierof quantity of car washed and quantity of lawns mowed.

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