Consider a country in autarky with only two inputs capital, Business Economics

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Consider a country in autarky with only two inputs capital

Consider a country in autarky with only two inputs, capital (K) and labor (L), that produces only two goods X and Y.

a. What is the condition for efficiency in production (allocation of inputs)?

b. Explain and show why competitive markets (i.e., all firms face the same price for capital and labor) generate (that is, result in) efficiency in production (i.e., lie on the contract curve; why do they give the condition you described in part a?).

c. What are the two other conditions necessary for this economy to be efficient?

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Business Economics: Consider a country in autarky with only two inputs capital

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