7. Suppose that at current factor prices, cloth is produced using 20 hours of labour for each acre of land, and food is produced using only 5 hours of labour per acre of land. Suppose that the economy's total resources are 600 hours of labour and 60 acres of land. Determine the allocation of resources on cloth and food. 8. Suppose there are 2 automobile industries, one at Home and one at Foreign. Home has annual sales of 900,000 cars and Foreign has annual sales of 1.6 million cars. Both countries have the same cost of production: F= $750,000,000; MC=$5000, b=1/30,000, where b is the responsiveness of the firm's sales to price. In the absence of trade, Home would have 6 firms, each producing 150,000 cars while Foreign would have 8 firms, each producing 200,000 cars given that Q=S * [1 - 1/b(P - P)]; P = c + 1/(b*n), AC=F/Q + c = n * F/S + c. a. In the absence of trade, calculate the price and the average cost and show the equilibrium level. b. In the presence of trade, calculate the price and the average cost at Foreign and show the equilibrium level c. Now suppose Home and Foreign trade cars with one another. The newly integrated market has total sales of 2.5 million cars and supports 10 firms, each producing 250,000 cars. Calculate the price per car and the average cost and show the new equilibrium level