changesaslaborisshiftedbetweenthetwosectors.ood1andgood2.Graphtheproductionpossibilityfrontier.Whyisitcurved?Q1Q2L1L2PPFThePPFiscurvedduetodecliningmarginalproductoflaborineachgood.Thetotallaborsupplyisfixed.SoasL1rises,MPL1falls;correspondingly,asL2falls,MPL2rises.SoPPgetssteeperaswemovedownittotheright.Themarginalproductoflaborcurvescorrespondingtotheproductionfunctionsinproblem2areasfollows:Supposethatthepriceofgood2relativetothatofgood1is2.Determinegraphicallythewagerateandtheallocationoflaborbetweenthetwosectors.Withtheassumptionthatlaborisfreelymobilebetweensectors,itwillmovefromthelow-wagesectortothehigh-wagesectoruntilwagesareequalized.Soinequilibrium,thewagerateisequaltothevalueoflabor’smarginalproduct.假设劳方自由地是在区段之间的机动性,它从低工资的区段将移动向high-wage区段,直到薪水被调平。因此在平衡,工资率与labor’s边际产品的价值是相等的。