2. Suppose that Home produces mobile phones using 3 activities: Manufacturing, Marketing, and R&D. It can potentially outsource any of these three activities to Foreign. The following show the numbers of skilled and unskilled workers needed to produce one unit in each activity in the Home and Foreign countries: Manufacturing Marketing R&D Home Skilled Labor 1 2 3 Unskilled Labor 4 3 2 Foreign Skilled Labor 2 4 6 Unskilled Labor 8 6 Skilled workers' wage is $10 in Home and $5 in Foreign. Unskilled workers' wage is $5 in Home and $1 in Foreign. In order to sell mobile phones in Home, any stage of production performed in Foreign must also incur a trade cost of 50% (that is, if it costs $X to perform a stage of production inside Foreign, the Home firm must pay $1.5xX to import it back to Home) a. What is the cost to the Home firm of performing each task (Manufacturing, Marketing, and R&D) in Home? What is the cost to the Home firm of performing each task in Foreign (remember to take into account trade costs)? b. Which, if any, activities will be outsourced to Foreign? c. Will skilled-labor intensive activities or unskilled-labor intensive activities be outsourced, and why? (Skilled labor intensity is defined as the number of skilled workers divided by the number of unskilled workers required to make one unit of the activity. For example, skilled labor intensity in manufacturing is 1/4.) Explain your answer. d. Suppose now that trade costs fall to 30%. Which activities are now outsourced to Foreign, and why? Does demand for skilled labor increase in the Home country, and why? Does demand for skilled labor increase in the Foreign country, and why? e. Go back to assuming that trade costs are 50%. Suppose that the unskilled wage in Foreign rose from $1 to $2. Which activities are now outsourced to Foreign, and why