(Table: Boat and Car Industries) This small economy has a total of 4 units of labor and 4 units of capital to be used between the boat and car industries.
a. Suppose that the boat industry is using 3 units of labor and 2 units of capital, leaving the car industry with 1 unit of labor and 2 units of capital. What is the MRTS_LK in the boat industry? In the car industry?
b. If the wage rate (W) is $100 and the rental rate of capital (R) is $200, what is a Pareto-efficient allocation of labor and capital between the two industries?

Question

(Table: Boat and Car Industries) This small economy has a total of 4 units of labor and 4 units of capital to be used between the boat and car industries.

a. Suppose that the boat industry is using 3 units of labor and 2 units of capital, leaving the car industry with 1 unit of labor and 2 units of capital. What is the MRTS_LK in the boat industry? In the car industry?
b. If the wage rate (W) is $100 and the rental rate of capital (R) is $200, what is a Pareto-efficient allocation of labor and capital between the two industries?

Quizplus · Accepted Answer

The Answer of (Table: Boat and Car Industries) This small economy has a total of 4 units of labor and 4 units of capital to be used between the boat and car industries. a. Suppose that the boat industry is using 3 units of labor and 2 units of capital, leaving the car industry with 1 unit of labor and 2 units of capital. What is the MRTS_LK in the boat industry? In the car industry? b. If the wage rate (W) is $100 and the rental rate of capital (R) is $200, what is a Pareto-efficient allocation of labor and capital between the two industries?

(Table: Boat and Car Industries) This Small Economy Has a Total