Earlier this year, U.S. president Donald Trump expressed his interest in buying Greenland, a self- governed island which belongs to Denmark, and incorporate it into U.S. territory. Imagine that Donald Trump is granted his wish and Greenland joins the U.S. You are interested in the short-run effect in the U.S. of this acquisition of land. (Note: The total population of Greenland is less than 60,000 people, so in your analysis, you can assume that the size of the U.S. labour force remains constant, and only the amount of land in the U.S. increases.)

For the sake of this exercise, you can model the U.S. as consisting of two sectors, a manufacturing sector and an oil-producing sector. Manufacturing uses labour and capital, whereas oil uses labour and land.

(a) What is the short-run impact of the increase of land on the wage of U.S. workers?

Illustrate using a suitable graph.