Consider the production contract curve in the graph on the right which illustrates efficient allocations of labor and capital to the production of two goods, guns and roses.

a. Use the information in the production contract curve to draw the production possibilities frontier for guns and roses. Put roses on the horizontal axis and guns on the vertical axis. Assume that when all resources are devoted to gun production, 100 guns can be produced; when all resources are devoted to rose production, 3,000 roses can be grown.
b. Locate point X in the Edgeworth box. Draw a corresponding point X on your production possibilities frontier. Be as accurate as possible in locating this point.

Transcribed Image Text:

- Labor inputs for roses QG-20 QR= 750 QR = 2,000 QR = 2,800 Labor inputs for guns