- 1. Suppose that the production process in Vietnam and Cambodia take the form of a Cobb-Douglas function where = K* (kL)% The two countries are similar in every respect except in their savings rates and the education of their population. In Vietnam. the average number of years of schooling for all adults is 8 and the savings rate is 10%. In neighboring Cambodia the average number of years of schooling is only 4 years and savings rate is 5%. Returns to each of the first four years of schooling-are 15% and fall to 10% for each year after that in both countries. Assume a = /3. A) Suppose you only have information about the difference in savings rate between the two countries B) Graphical illustrate the answer you obtain in A). but have no information about schooling. Write the expression for and calculate the ratio of the output per worker in Vietnam relative to the output per worker in Cambodia in the steady state that is implied by the Solow model. C) Now assume that you are given the information on the differences in the educational attainment in the two countries. Use the returns to schooling in addition to the information about the savings rates in the two countries to compute the value of the ratio indicated in A). Be careful to show your work. Then. interpret your answer. 2. In Mexico. a small family own a farm. They all work on the farm and there are no other dependents. Their total income per year depends on the number of members working on the farm that year. Total annual income is represented by the following chart: Number working on farm Each member has the opportunity to migrate to the nearest city where there are two different types of jobs..Informal sector jobs are available to everyone and pay $300. Formal sector jobs are more difficult to- get and pay $600. The probability of finding a job in the formal sector is 70%. Once a member migrates to the city, she cannot return. a. b. el Fill out the table above with marginal product of labor (MPL) and average product of labor (APL) What is the expected wage in the nearby city? Consider the wage in which each member's wage is based on their respective marginal products. How many members will choose to migrate to the city? Show your work Next suppose that income from the farm is divided evenly between the family members who stayed in the farm (they are all paid the average product). How many members will migrate to the city? Show your work. Which of the above answers maximize total family income? Explain using the economic principles that you learnt in class regarding maximizing family welfare