Suppose China can produce two goods, cloth and food and has three factors of production labor (L), capital (K) and Land (T for terrain). Food is produced using land and labor while cloth is produced using capital and labor, hence, labor is a mobile factor. Keeping in mind the Specific Factors Model, answer the following questions a) What are the production functions for cloth and food? b) Write down the wage equations for each sector and the slope of the production possibility frontier. c) Drive the production possibility frontier for China [hint 4 quarter diagram]

Suppose China can produce two goods, cloth and food and has three factors of production labor (L), capital (K) and Land (T for terrain). Food is produced using land and labor while cloth is produced using capital and labor, hence, labor is a mobile factor. Keeping in mind the Specific Factors Model, answer the following questions a) What are the production functions for cloth and food? b) Write down the wage equations for each sector and the slope of the production possibility frontier. c) Drive the production possibility frontier for China [hint 4 quarter diagram]

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.6P

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