Question
I m stuck on this question. Could you please show me how to solve step by step this question? Thanks in advance. 1) The world
I m stuck on this question. Could you please show me how to solve step by step this question? Thanks in advance.
1) The world production possibility frontier (PPF) is given by;
5000 = q2x+ 25q2y.
The utility function for the consumers is;
U=qxqy
I have calculated for you the point on the PPF at which the world will produce and
consume, which is qx = 25, qr = 10.
a) Draw the PPF, labeling three points with numerical values including (25,10).
Arithmetic tip: Sqrt5000 = 70.7.
b) Add to your graph to show what determines the point at which the world will produce and consume.
c) Show how we can learn the ratio of the price of the two goods from the graph.
d) What is the ratio of the prices of the two goods?
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