An economy consists of three workers: Felix, Larry, and Raphael. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Felix can either mow 2 lawns or wash 1 car; Larry can either mow 1 lawn or wash 1 car; and Raphael can either mow 1 lawn or wash 2 cars.
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.
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An economy consists of three workers: Felix, Larry, and Raphael. Each works 10 hours a day and can p...
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