An economy consists of three workers: Latif, Muthu and Choo Beng. Each works 10 hours a day and can

produce two services: mowing lawns and washing cars. In an hour, Latif can either mow one lawn or

wash one car; Muthu can either mow one lawn or wash two cars; and Choo Beng can either mow two

lawns or wash one car.

a)

Calculate how much of each service is produced under the following circumstances which we label

A,B,C, and D:

All three spend all their time mowing lawns

(A)

All three spend all their time washing cars (B)

All three spend half their time on each activity (C)

Latif spends half his time on each activity,

while Muthu only washes cars and Choo Beng only mows

lawns (D)

b)

Graph the production possibilities frontier (PPF) for this economy. Using your answer to part a)

identify points A B, C, and D on your graph.

c)

Explain why the PPF has the shape it does.

d)

Are any of the allocations calculated in part a) inefficient? Explain