Inefficient allocation, A country has only two inputs K and

Inefficient allocation

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Reference no: EM13985639

A country has only two inputs K and L and produces two goods X & Y. It is endowed with 30 units of L and 15 units of K. Industry X is endowed with 25 units of L and 5 units of K and industry Y has the rest of L and K. This is an inefficient allocation.

A) Graph this endowment point as point 1, labeling the levels of L and K with L on the x - axis.

B) Label the total endowment of K and L on the graph.

C) Given the t this is a Pareto inefficient allocation, graph and label the isoquants.

D) Show the region that Pareto efficient exchange can lead to.

E) Show the largest increase in X that can result from an efficient exchange. Label this point 2.

F) Show the largest increase in Y that can result from an efficient exchange. Label this point 3

G) Show a Pareto efficient allocation that has an increase in X and Y. Label this point 4.

Reference no: EM13985639

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