Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Solve clearly Sylvania is a small economy producing two products, X and Y, using two factors of production, capital and labour, under constant returns to

Solve clearly

image text in transcribed
Sylvania is a small economy producing two products, X and Y, using two factors of production, capital and labour, under constant returns to scale. Capital and labour are freely mobile between sectors, but immobile internationally. Let Q x and Qy be the output quantities. Consumers have a utility function U(Dx, DY) = Dx + 2Dy, where Dx and Dy are consumptions of X and Y. The price ratio is defined as P= Sylvania's production possibility frontier (PPF) is defined by the equation Qx + 6QY = 15, which has slope given by the marginal rate of transformation MRT = - d day _ 12x dQ x 6 QY Answer the following questions. All numerical answers must be expressed as decimals (not whole numbers or fractions) and be accurate to two decimal places. (a) Calculate Sylvania's autarky product price ratio P = P (b) Calculate Sylvania's autarky production quantity for X: (c) If the world price ratio is P = 1, calculate Sylvania's production quantity for X under free trade: (d) If the world price ratio is P = 1, calculate Sylvania's income expressed in units of product X under free trade: (e) Suppose that the production function for product X is given by F(Lx, Kx) = LY Ky , where Lx, Kx denote the input quantities. If Sylvania's factor price ratio (wage-rental ratio) is w = = = 2, calculate the capital-labour ratio used in the production of good X

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Economics

Authors: Gregory Mankiw, Mark P. Taylor

5th Edition

1473768543, 978-1473768543

More Books

Students also viewed these Economics questions