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1. In the 2-factor, 2 good Heckscher-Ohlin model, assume that a, a KF = 4 and a = LF = 2, KC a =
1. In the 2-factor, 2 good Heckscher-Ohlin model, assume that a, a KF = 4 and a = LF = 2, KC a = 2, LC 1. There are 2000 units of labor and 4000 units of capital available. Use the method we learned in class - a. Write the labor and capital constraint equations. 2Qc+Q=2000 (Labor Constraint) 2Qc+4Q=4000 (Capital Constraint) b. Draw the production possibilities frontier (PPF). Remember to put the quantity of food on the x-axis just like we did in class. c. Show how the slope is different in the two parts of the PPF. Explain what's going on in terms of opportunity cost of food. d. Explain the three extreme points of the PPF, just like we did in class. At each point figure out: what is produced, and whether all or part of labor and capital is used.
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