3. Consider a two-product, one-person economy. This person assigns 8 hours per day to work. He can either catch fish or gather apple. He can catch one fish per hour or 2 apples per hour. his utility function is U(F,A) = FA where F is his daily fish consumption and A is his daily apple consumption.

(a) Derive the equation of the production possibilities frontier for a typical day of this person's economy and graph it. (b) Find the marginal rate of transformation and marginal rate of substitution

between apple and fish.

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(c) Set up this person's utility maximization problem and find the optimal bundle. (Illustrate the results on the graph).

Answer rating: 100% (QA)

a To derive the equation of the production possibilities frontier PPF for the persons economy we need to consider his daily time constraint and the pr... View the full answer