3. (15) Consider the two-factor (capital, labour) production function, Y = AK \"1.1-\

3. (15) Consider the two-factor (capital, labour) production function, Y = AKCtLla, for Island A, which is a small economy that can trade with the rest world but "takes" prices from the world market. It produces agricultural and electronic products. Let A = I and industries and ae a a, where the subscripts denote the product. For example, ae denotes the capital share in Island A's production of electronic products, while aa demotes the capital share in its production of agriculture. Please note again that Island A and the symbol A (in italics) are different, with the latter representing some scaling factor in the equation above, and the scaling factor is assumed to equal I for both goods and in both islands. (Please note that this question is not as tricky as it seems.) (a) (7.5) Assume Island A is relatively abundant in labor, and so possesses little capital. Draw the production possibility frontier for Island A. (b) (7.5) Now assume that the world price for electronic products increases by some significant amount. Show the change in Island A's production in the diagram that you made for above.