The labor force of an island country consists of only five workers. There are only two industries in Show more The labor force of an island country consists of only five workers. There are only two industries in this island one producing X and the other producing Y. The following graph shows the production possibilities frontier (PPF) for this country. It shows the effects on the production of X and Y from shifting workers from one industry to the other one worker at a time. For example suppose that currently X = 1 and Y = 90. Now if we shift one worker from Y to X production the production of X will increase to X = 2 and the production of Y will decrease to Y = 75. 1)Consider the information in the attached file. The allocatively efficient quantities of the two goods are: X = units and Y = units. 2)Consider the information in the attached file. Suppose that because of a new process invention the labor in the Y industry becomes more productive. In particular the marginal product of every worker in the Y industry increases by 20 units. The marginal product of labor in the X industry remains unchanged. The marginal social benefit of X in terms of Y also remains unchanged. As a result of this invention the allocatively efficient quantities of the two goods become X = units and Y = units. Show lessΝ

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