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4 . The Four-Quadrant Diagram: Assume that capital is the specific factor in the clothing sector, that land is specific to the food sector, and
4 . The Four-Quadrant Diagram: Assume that capital is the specific factor in the clothing sector, that land is specific to the food sector, and that labor is mobile between the sectors. II Food LE Clothing III IV (a) Suppose this economy experiences an increase in the supply of capital. Draw in the shift(s) in the total product of labor curve and the resulting shift in the production possibilities frontier. Does increased capital attract labor to the clothing sector or does increased capital push labor out of the clothing sector? (b) Now suppose this economy experiences an increase in the supply of labor instead of capital. Draw in the shift in the labor constraint in quadrant III and the resulting shift in the production possibilities frontier. (c) In (b), which of the following outcomes are possible? (i) output of both clothing and food increase; (ii) clothing production increases and food production falls; (iii) food increases and clothing production falls
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