Question

Assume that Home and Foreign produce only two goods – wheat and carrots. Home has 1000 units of labour available. In Home, the unit labour requirement in wheat production is 4 and in carrot production it is 2. On the other hand, Foreign has 750 units of labour available. Foreign’s unit labour requirement in wheat production is 5, while in carrot production it is 1. Graph both Home’s and Foreign’s production possibility frontiers.

Answer 1

Let Labor available at home be which is 1000 units as per question.

Let represents unit labor requirement at home in wheat production which is 4.

Let represents unit labor requirement at home in carrot production which is 2.

Let W represent wheat and C represent Carrot . So, resource constraint for Home is represented by

Substituting values imply-----

Home can produce units of wheat when it produce 0 carrots and can produce units of carrots when it produce 0 wheat. Production possibility frontier for home is attached below as Figure 1----------

Figure 1

Let Labor available at foreign be which is 750 units as per question.

Let represents unit labor requirement at foreign in wheat production which is 5.

Let represents unit labor requirement at foreign in carrot production which is 1.

Let Wf represent wheat and Cf represent Carrot in foreign. So, resource constraint for foreign is represented by

Substituting values imply-----

Foreign can produce units of wheat when it produce 0 carrots and can produce units of carrots when it produce 0 wheat. Production possibility frontier for foreign is attached below as Figure 2----------

Figure 2