Consider a country in autarky with only two inputs, capital(K) and labor(L), that produces only two goods apples (A) and bananas (B).
a. What is the condition for efficiency in production?
b. Explain 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?). Include a graph of a firms cost minimizing choice of capital and labor.