New York University ECON-SHU ECON-SHU microecono Suppose that an economy produces and consumes only two goods: food (x) and toys (y). The economy has 100 workers and 50 machines. Each worker can
(x) and toys (y). The economy has 100 workers and 50 machines. Each worker can produce 1 unit of food or 1 unit of toy per period. Each machine each can produce 2 units of food or half unit of toy per period. The economy always needs exactly 80 units of food each period and as many toys as they can get.
a. Draw the production possibilities frontier of the economy.
b. How many toys they can produce? Suppose that they can trade with the world for the following exchange rate: 2 units of food for 1 unit of toy (or 1 unit of food for half unit of toy). Assume that they can buy and sell as many as they want without affecting the price.
c. Calculate the consumption and production point of this economy. Mark the point on the graph. Explain the result you found.
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