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Consider a Country with Two Factors of Production

Question 120

Essay

Consider a country with two factors of production
(capital and labor) that makes two goods (X and Y).
Suppose that capital is specific to each good and is
divided into two types, KWX and KWY.How does this
PPF compare to the PPF when capital is not specific?
Now suppose that both capital and labor are specific to
the two goods.What does the PPF look like now? How
does it compare to the PPF when only capital is
specific? How does it compare to the PPF when nothing
is specific?

Correct Answer:

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When only capital is specific, it lies w...

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