Consider a small country like Canada which produce two goods: manufacturing and food products. Assume it exports manufacturing products (the capital intensive good) and imports food.

(iii) To achieve the goal of increasing the share of labor used in the manufacturing sector (i.e. decrease K/L used in manufacturing) while keeping full employment of the factors of production, the government can choose among three types of policies: (a) to subsidize wage payment in manufacturing (for each worker in manufacturing, the government pays a share of the wage rate so that manufacturing firms effectively pay (1 )w); (b) to tax or to subsidize the production of manufacturing; or (c) to tax or to subsidize the exports of manufacturing products. Identify precisely what each of (a), (b) and (c) does on the allocation of resources and for the government's goal. It does not matter whether you consider a tax or a subsidy for (b) and (c) as long as you explain carefully and precisely what either the tax or the subsidy does.