3115123, 9:20 PM Cluiz ECON3394A0'l Development Economics: Problems and Policies University of Manitoba Question 11 (1 point) Saved : 4)) Listen } Industrialization makes nations less homogeneous in terms of what is consumed, what is read, what is seen on the television and at the cinema and what is learned in schools and in universities. Question 12 (8 points) 4)) Listen } l Consider an economy with two sectors, a traditional one labeled Twith many producers but all added up in one representative firm for the sector, and an industrial one labeled lcomposed of a price limiting monopolist. There is only one factor of production in the economy, namely (unskilled) labour, where there are one hundred individuals. The traditional sector produces rice ( QT} in a competitive market with linear (constant returns} production function Qr = LT where LT denotes the amount of labour used in that sector. The price limiting monopolist on the other hand produces rice with a production function that has increasing returns, which is defined as _ o st, 0 represents the cost of migrating from the traditional sectorto the industrial sector, a switching cost that can be say transportation. httpsun iversityofmanitob a_desire2leam_ co mdelflmslquizzing {u serfattemptfquiz_start_frame_auto.d2l?ou=512128&isprv=&drc=0&qi=23?1 598'ch l=_ ._ 511 6 3115123, 9:20 PM Cluiz ECON3394A0'l Development Economics: Problems and Policies University of Manitoba Suppose the demand for rice from the traditional sector is defined as Y, where a E (0,1), while the complement (1 0')Yis the demand for rice from the monopolist where Ydenotes total labour income in the economy, i.e. Y : WrLr + WILL The distribution of labour among the two sectors determines ifthe monopolist enters since that would only happen if L: is sufficiently large, otherwise it would not, in which case the demand for rice is satisfied only by the traditional sector and (I : 1. In what follows we study the conditions under which industrialization through a Big Push would arise or not. Note that the profit function forthe traditional sector is Hr = PQT WrLr = (1 WTJLT while that for the industrial sector is _ {WILI if LI 4: 5 \"I 3(L; 5) _W}'Lf 3.fo 2 5 a. Suppose that competition will make profits go down to zero in the long run for the traditional sector. The competitive wage that generates zero profits regardless ofthe level of 7 used is (numeric answer}. If (i=1 the equilibrium wage the monopolist faces then is (numeric). b. Consider the industrial sector and determine the minimum amount of labour, denoted Him\311523, 9:20 PM Quiz ECON3394A0'l Development Economics: Problems and Policies University of Manitoba e. In order to do that equate the supply and demand of rice in the traditional sector to determine Lr as a function ofa and L1. But since LT : 100 L1 then using this you can find the supply of labour forthe industrial sector denoted Li as a function of a and d. If 0! =0.8 and d=1 then L? = (numeric answer, round to nearest integer) There are two cases to consider: i) when Li 2 Ufa" such that the monopolist enters and attains profits, in which case industrialization arises (Big Push) in the economy in equilibrium: ii) when L?