Question: Could you please answer question 10? Thanks Suppose in an economy with two inputs (capital K, and labor L) and two firms ( firm 1

Could you please answer question 10? Thanks Suppose in an economy

Could you please answer question 10? Thanks

Suppose in an economy with two inputs (capital K, and labor L) and two firms ( firm 1 and 2), the MRTSK for L = 2 and the MRTSK for L = 1. (Capital is on the vertical axis). What is an example of how an exchange of capital and labour between the two production sectors can increase the output of both sectors? Firm 1 could give up 1.5 units of capital to firm 2 in exchange for one unit of labour and both would be able to produce more. Firm 1 could give up 1/2 a unit of labour to firm 2 in exchange for one unit of capital and both would be able to produce more. It is not possible to increase production for both firms through an exchange of capital and labour. Firm 1 could give up 1/2 a unit of capital to firm 2 in exchange for one unit of labour and both would be able to produce more. Firm 1 could give up 1.5 units of labour to firm 2 in exchange for one unit of capital and both would be able to produce more

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