Question: Standard Model:

Given the input/output information below,

1. What are the assumptions of the standard model?
2. Calculate the marginal product for aircraft and pharmaceuticals in the table below.
3. Identify the feasible production possibilities, assuming that there are only 5 workers in the entire economy.
4. If the price of aircraft and the price of pharmaceuticals are each equal to $1, what output combination will a country choose?
5. Graph the PPF and indicate graphically the optimum choice, with a budget line.
6. How would your answer change if the price of aircraft rises substantially?
7. Graph and explain.

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Solution: The downloadable solution consists of 4 pages
Deliverable: Word Document