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Can you please answer parts A and B both please Suppose the economy .pdf
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Can you please answer parts A and B both please Suppose the economy .pdf

  1. Can you please answer parts A and B both please Suppose the economy consists of two sectors: Sector 1 and Sector 2. The production function of each sector is given as AiLi1, where i represents sectors and i=1,2.Li represents the labor allocated to sector i and Ai is the productivity of sector i. Suppose that there are 100 units of labor in the economy and all the labor is allocated between sectors (no idle resources). Assume =1/3,A1=1.5,A2=2 a. Calculate output in each industry for each of the following allocation of labor to sector 1 : L1=1,2,,99 (all the integers between 1 and 99). Plot a figure similar to the above. (10 points) b. Suppose that 60 units of labor is allocated sector 1 and 40 units of labor is allocated to sector 2 . Calculate the output lost due to misallocation. Notice that the optimal units of labor allocated to each sector can be non- integer values. (25 points)
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