11. Suppose that the home country has an endowment of 16 units of labor, which can be used to produce produce goods X and Y. Good Y is produced by a competitive industry under constant returns to scale, with aLY=.5 the labor requirement per unit of good Y. The X industry is a competitive industry with increasing returns that are external to the firm. The unit labor requirement for producing X is aLX=2LX1/2, where LX is the total employment in the X sector. a) Draw the industry level relationship between output and labor for the X sector, and use this to draw a production possibility frontier for the country. b) Distinguish between the cost of a unit of X if a firm expands its output (i.e. holding LX constant) with the cost if all firms expand their outputs. Explain why this can lead to an economy being stuck in an inefficient equilibrium with trade. c) For what world prices would the home country would be willing to specialize in good X? How would your answer differ if the Home country population increased to 25? Explain. 11. Suppose that the home country has an endowment of 16 units of labor, which can be used to produce produce goods X and Y. Good Y is produced by a competitive industry under constant returns to scale, with aLY=.5 the labor requirement per unit of good Y. The X industry is a competitive industry with increasing returns that are external to the firm. The unit labor requirement for producing X is aLX=2LX1/2, where LX is the total employment in the X sector. a) Draw the industry level relationship between output and labor for the X sector, and use this to draw a production possibility frontier for the country. b) Distinguish between the cost of a unit of X if a firm expands its output (i.e. holding LX constant) with the cost if all firms expand their outputs. Explain why this can lead to an economy being stuck in an inefficient equilibrium with trade. c) For what world prices would the home country would be willing to specialize in good X? How would your answer differ if the Home country population increased to 25? Explain