1. The figure shows the Production Possibilities Frontier for Home. Home produces both Bicycles (B) and Chairs (C) using a single factor of production, Labour. The marginal product of labour is constant in the production of both goods (MPLB is a constant and MPIC is a constant). MPLC = -
Chairs
400
300
200
100+
0++
0 20 40 60 80 100 120 140 160. 180, 200
(a) Complete the following table for the Home country:
Bicycles
LMPLC MPLB ALB
aLC
Home
(b) Determine the opportunity cost of a Bicycle.
D
(c) The relative demand for Bicycles in the Home country is
3 PR
=
Determine
the quantity of both goods produced and consumed in this economy as well as
the labour employed in each industry, L and Lc.