Question

4. Problems and Applications Q4

An economy consists of three workers: Carlos, Felix, and Larry. Each works 10 hours a day and can produce two services: mowing lawns and washing cars. In an hour, Carlos can either mow 1 lawn or wash 1 car; Felix can either mow 1 lawn or wash 2 cars; and Larry 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)
Carlos spends half his time on each activity, while Felix only washes cars and Larry only mows lawns. (D)

In the table below, identify the opportunity cost of washing cars for each worker.

Worker	Opportunity Cost of Washing Cars
Carlos
Felix
Larry

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.

PPFABCD0510152025303540455050454035302520151050Quantity 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

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Answer 1

A) Lawns mowed by Carlos + Felix + Larry = Mow 10 lawn + Mow 10 lawn + Mow 20 lawn = Mow 40 lawn

B) Total Cars washed = 10 car by Carlos + 20 car by Felix + 10 car by Larry = 40 cars washed

C) (5 car + 5 lawn) by Carlos + (5 lawn + 10 cars) by Felix + (10 lawns + 5 cars) by Larry = 20 cars and 20 lawns

D) (5 car + 5 lawn) by Carlos + 20 cars by Felix + 20 lawn by Larry = 25 cars and 25 lawns

Opportunity cost of washing car:

Carlos: 1 car = 1 lawn

So, opportunity cost is the mowing 1 lawn.

Felix: 2 cars = 1 lawn

1 car = 1/2 = 0.5 lawn

Opportunity cost of 1 car wash is 0.5 lawn.

Larry; 1 car = 2 lawn

Opportunity cost of 1 car wash is 2 lawn.

GRAPH IS MISSING.