Question

Suppose there are 10 million workers in Canada and that each of these workers can produce either 2 cars or 30 bushels of wheat in a year. Draw Canada’s production possibilities frontier and show where it would produce if it decided to consume an equal amount of cars and of bushels of wheat. (20 pts.) How would it distribute its workers to produce the quantities in b.? (10 pts.)

Answer 1

There are 10 million workers

1 worker car produce 2 cars of 30 bushels of wheat

Thus, maximum 20 million cars or 300 million bushels of wheat can be produced

To produce equal car and wheat. Let there are x million workers employed for making cars. Total production of cars is 2x. Labor employed in producing wheat would be (10 - x) which would produce (10 - x) * 30 wheat.

To make equal car and wheat,

2X = (10 - x) * 30

2x = 300 - 30x

x = 9.375

Workers producing cars are 9.375 million and workers producing wheat is 0.625 million which will produce 18.75 million of both goods.