5. Say that country A's MP_L = -L + 11 and country B's MP_L = 2L + 5. What would be the optimal amount of L? Note: country B's MP_Lis written in terms of the coordinates of country A.

a. Does the MP_L for both countries graph as you would expect? (10 points)

b. What is the optimal amount of labor? (10 points)

c. Say that country A originally had 1 unit of labor and country B had the rest. Then, migration is allowed. By how much does welfare improve? (10 points)

6. For this question, please use the assumptions of the variation of the Solow model we used in this section; that is, h = = 0. Also, assume that A = 1, = 1/3, = .15, the real interest rate is 5%, and the population growth rate is .02.

a. What would be the steady-state level of capital? (10 points)

b. If capital mobility then occurred, what would be the steady state level of capital? (10 points)