1 using labor and capital and good 2 using labor and land. The total supply of labor is 100 units. Given the supply of capital, the outputs of the two goods depends on labor input as follows:РTo analyze the economy’s production possibility frontier, consider how the output mix changes as labor is shifted between the two sectors.РGraph the production functions for good 1 and good 2. РGraph the production possibility frontier. Why is it curved?РQ1РQ2РL1РL2РPPFР The PPF is curved due to declining marginal product of labor in each good. The total labor supply is fixed. So as L1 rises, MPL1 falls; correspondingly, as L2 falls, MPL2 rises. So PP gets steeper as we move down it to the right.РThe marginal product of labor curves corresponding to the production functions in problem2 are as follows:
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