Question
Consider a specific-factors model where two Countries, Denmark and Tanzania, use labor to produce cake (C) and helicopters (H). However, arable land (A) are a
Consider a specific-factors model where two Countries, Denmark and Tanzania, use labor to produce cake (C) and helicopters (H). However, arable land (A) are a factor specific to cake, and jerrycans (J) are a factor specific to helicopters. Suppose that Tanzania has L = 100 workers, J = 40 jerrycans, and A = 1000 arable land. The production functions and marginal products of labor for cake and helicopters are:
C = 4 x Lc0.5x A0.5
MPLc= 2 x Lc-0.5x A0.5
H = 4 x LH0.5x J0.5
MPLH= 2 x LH-0.5x J0.5
In Tanzania, the price of crystals is 20 and the price of hyperdrives is 200. In this case, the wage rate will be ________ and________ workers will be employed in the cake industry and__________ workers will be employed in the helicopter industry.
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