2. Two goods, Boots (B) and Forestry products (F) are produced in a country. The production of Boots uses Labour (Z) and Capital (K). Capital is a specific factor and the stock of Capital is fixed at K's - 10. The production of Forestry products uses Labour (L) and Land (7'). Land is a specific factor and the stock of Capital is fixed at To = 8. Production functions for the goods are as follows: B - KB(2LB - 10 F - TP(3LF - LE Labour is mobile between the two industries. The total amount of labour is _ - 10. LB + LF - L. (a) Sketch a concave PPF with B on the horizontal and F on the vertical. Indicate the values on the horizontal and vertical axes and the output of the two goods when half the labour is allocated to each industry. (b) The marginal product of labour functions are as follows: MPLB - 2KB - KBLB 5 MPLF = 3TF - TPLP Sketch the graph of the MPas function. Use the MPLa to confirm the output of B when all the labour is allocated to the production of Boots. Sketch the graph of the MPup function. Use the MPap function to confirm the output of F when half of the labour is allocated to the production of F. (e) In autarky, the prices of goods at Home are Pa" = $2.50 and PAut = $3.00. Determine the autarky equilibrium allocation of labour and the wage at home and the output level of both goods. (d) When Home trades with Foreign the free-trade prices of goods are Pg - $3.50 and PF = $2.00. Determine the new allocation of labour when there is free-trade. Determine the wage in the home country. Determine the real wage measured with respect to each good