Full Employment of factors of production (1)

This assumption is related to the problem of adjustment ,but it merits separate treatment because of its application to a more general context.The assumption that all of country is factors of production are fully employed (or experience a given level of unemployment owing to institutional characteristics,for example,"natural level of unemployment"),combined with their efficient use in the competitive market ,means that the country is operating on the PPF.thus,because of this assumption ,we have not previously analyzed situations where trade moved the country from somewhere inside the PPE to a point on the ppf.
The "full -employment " assumption is a general one in microeconomic theory as will as in trade theory.In micro ,it is assumed that the macroeconomic question of unemployment has been solved .the solution to the problem of unemployment might lie ,for example ,with effective monetary and fiscal policies.Given this solution ,the subject of microeconmics looks at questions of efficiency and welfare.