Question

1. An economy consists of three workers: Larry, Moe, and Curly. Each works ten hours a day and can produce two services: mowing lawns and washing cars. In an hour, Larry can either mow one lawn or wash one car; Moe can either mow one lawn or wash two cars; and Curly can either mow two lawns or wash one car.

Answer 1

Answer:

A. The first scenario where all three workers spend all their time mowing lawns,

In 10 hours  = Larry mows 10 lawns, Moe mows 10 lawns, and Curly mows 20 lawns = (Total is 40 lawns mowed, and 0 cars washed)

B. The second scenario where all three workers spend all their time washing cars

In 10 hours = Larry washes 10 cars, Moe washes 20 cars, and Curly washes 10 cars = (Total is 40 cars washed, and 0 lawn mowed)

C. The third scenario where all three workers spend half their time on each activity then;

In 5 hours for mowing lawns and 5 hours for washing cars we get:

Larry mows 5 lawns and washes 5 cars

Moe mows 5 lawns and washes 10 cars

Curly mows 10 lawns and washes 5 cars

In total they mowed 20 lawns and washed 20 cars

D. The fourth scenario, Larry spends half his time on each activity, while Moe only washes  cars and Curly only mows lawns.

Larry mows 5 lawns and washes 5 cars

Mow washes 20 cars

Curly mow 20 lawns

In total, 25 lawns will be mowed and 25 cars will be washed

When this is plotted, the production frontier would produce a bow out shape, which is as a result of opportunity cost.

From the diagram, it can be clearly seen that Scenario C is inefficient because it is possible to mow more lawns and also wash more cars without actually reducing the production of others to 25 each.

Yes C is inefficient because more lawns can be mowed and more cars can be washed by simply just reallocating time of the 3 workers.

Explanation: