Question

# . Now consider an economy consists of four workers: Harry, Larry, Moe, and Curly, where Harry and Larry are

brothers. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, both Harry and 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 four spend all their time mowing lawns. (A) • All four spend all their time washing cars. (B) • All four spend half their time on each activity. (C) • Larry and Harry spends half their time on each activity, while Moe only washes cars and Curly only mows lawns. (D) b. In the production possibilities frontier for this economy. how many kink points would be on your graph? 1 c. Explain why the production possibilities frontier has the shape it does. d. Are any of the allocations calculated in part (a) inefficient? Explain. e. If you are the CEO of the washing company, whom should you hire first? Why? f. If you are the the lawn owner, whom should you hire first? Why? g. If there are 6 heterogeneous workers, how many kink points would be there on the PPF? h. If there are 6 homogeneous works, how many kink points would be there on the PPF? i. If there are 6 workers, how many kink points would be there on the PPF? j. If there are 6 workers, these workers could be divided into 2 categories (high or low) according to their skills, how many possible labor force compositions? k. If there are N heterogeneous workers, how many kink points would be there on the PPF? l. If N → ∞, what would happen to the PPF?

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