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Economic Problem

 Ms. Smith and Mr. Novak live on a remote deserted island. They have two factors of production Labor and Capital and use them to produce two products Bread and Cloth. Labor and Capital must be somewhat allocated to the production of two goods, appropriate technology must be selected and bread and cloth must be distributed between Ms. Smith and Mr. Novak, who then perceive certain levels of satisfaction (utility) or welfare by consuming them.





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