. A competitive rm has a production function described as follows: y = L 1=3 u L 1=3 s K1=3 ; where Lu; Ls; and K are unskilled labor, skilled labour, and capital, respectively. Suppose that in the short run this rm must use 27 units of capital but can vary its amounts of labor (skilled and unskilled) freely. (a) If the wages for the skilled and unskilled labors are wu and ws; and the price of output is p = $4, obtain rms demands for Lu and Ls in the short run? (b) Suppose the government decides to give subsidies of $s to rm for every Lu they hire. Examine the relative eects of this policy on the employmet of unskilled labour and skilled labour. (c) If the government, instead, decides to subsidize rms on a lumpsum basis. What will the relative eects be on the employmet of unskilled and unskilled labour?