An economy consists of three workers: Charles, Gilberto, and Lorenzo. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Charles can either mow 1 lawn or wash 1 car; Gilberto can either mow 1 lawn or wash 2 cars; and Lorenzo can either mow 2 lawns or wash 1 car. For each of the scenarios listed in the following table, determine how many lawns will be mowed and how many cars will be washed per day and enter these values into the corresponding row.
Scenario Lawns Mowed Cars Washed
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)
Charles spends half his time on each activity, while Gilberto only washes cars and Lorenzo only mows lawns. (D)
In the table below, identify the opportunity cost of washing cars for each worker.
Worker Opportunity Cost of Washing Cars
Charles
Gilberto
Lorenzo
Assume that the resources best suited to producing a particular service are preferentially used in the production of that service and that as the economy moves down along the production possibilities frontier, one worker at a time is transferred from mowing lawns to washing cars. Using the blue points (circle symbol), graph the production possibilities frontier (PPF) for this economy on the following graph. Then use the black point (plus symbol) to identify point A, the green point (triangle symbol) to identify point B, the orange point (square symbol) to identify point C, and the purple point (diamond symbol) to identify point D on the graph.
PPFABCD0510152025303540455050454035 302520151050Quantity of Lawns MowedQuantity of Cars Washed
True or False: The production possibilities frontier has a kinked shape because each worker faces a constant trade-off between mowing lawns and washing cars.
True
False
Indicate whether each of the following allocations is efficient or inefficient.
Allocation
Efficient
Inefficient
A
B
C
D