On a small tropical island, two firms draw on the same supply of labor and capital. The first firm produces fish, and in the fishing industry the marginal product of labor is 8 and the marginal product of capital is 5. The second firm produces coconut, and in the coconut industry the marginal product of labor is 64 and the marginal product of capital is 32.
a. Show that the allocation of labor and capital between the two industries is inefficient.
b. Suggest a reallocation of labor and capital that will enable the island to produce more fish and coconuts without using more resources.