Question
Consider an economy that produces two goods F and M with a single factor of production, labor, denoted by L. The total labor force of
Consider an economy that produces two goods F and M with a single factor of production, labor, denoted by L. The total labor force of the economy is given by L?. While good F exhibits constant returns to scale, production of good M exhibits increasing returns to scale. The production functions are:
Show that the PPF for this economy is ??bowed in?? towards the origin.
F = BL;B>0 M = a(L)L ; a'>0
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Macroeconomics
Authors: N. Gregory Mankiw, William M. Scarth
5th Canadian Edition
1464168504, 978-1464168505
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