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Consider the model of exercise 1. Sketch a graph (like figure 4-7 in the book) with wages on the y- axis and the allocation of
Consider the model of exercise 1. Sketch a graph (like figure 4-7 in the book) with wages on the y- axis and the allocation of labor over the two sectors on the x-axis. a) Analyze what happens to wages if 1) the price of both goods changes equally; 2) the price of cars increases. b) Discuss who benefits from the price increase of cars: workers in the car sector, workers in the food sector, capital owners, and landowners. c) Explain how opening to international trade affects the distribution of income
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