Equilibrium: Consider the follow production function: Q_M = 20 L^1/2 and Q_A = 40 L^1/2 with total labour supply (L) is 1000 units.Let P_M = 10 and P_A = 5.

SPECIFIC FACTORS MODEL DUE: 1: Equilibrium: Consider the follow production function: QM = 20 L/2 and QA = 40 L12 with total labour supply (L) is 1000 units. Let PM = 10 and PA = 5. (1/2 point)a) What is the marginal product of labour in Manufactures? Is it rising or falling as L increases? Show. Discuss the intuition? (1/2 point)b) What is the marginal product of labour in Agriculture? Is it rising or falling as L increases? ? Show. Discuss the intuition? (4 points) c) Given the labour supply (L), what is the equilibrium market wage and labour allocated to Agriculture and Manufacturing assuming labour is mobile between sectors? Show your work. (4 point) d) Suppose Land (T) is specific to Agriculture and capital (K) to Manufactures. What are the total returns to land and to capital given the technology, output prices, and labour supply? Show your work. (1 points) e) Find GDP using Value Added and check using the Income Approach. 2: Technology. Suppose the production function for manufactures changes to: QM = 30 L12. Let QA = 40 LUZ, total labour supply be 1000 units, and PM = 10 with PA = 5. (4 points) a) Find the new equilibrium allocation of labour across sectors, the market wage, and the returns to land and capital. (2 points) b) What happens to real wages with this rise in productivity? Show your work and interpret. (4 point) c) Explain the effects and implications of this improvement in technology. Who gains? Who loses? (eg real returns to capital owners and to land owners.) Show your work. 3: TRADE. Suppose we have two countries that differ only in capital stocks: Home: OM = 20 L'/2 and QA = 40 LU- with total labour supply 1000 units. Foreign: QM = 30 LU/2 and QA = 40 L - with total labour supply 1000 units (3 points) a) Show the relative supply (Qmy Qa) in Home and in Foreign given PM = 10 and PA - 5. Explain | why Home's relative supply of manufactures will always be less than Foreign's for any given set of prices. (2 points) b) Assume that relative demands are the same. Now based on (a), who will have lower manufacturing prices in autarchy. Explain. (1 points) c) Who exports AG if we move to free trade? MANU? Explain. (5 points) c) Who will support free trade? That is, are owners of capital better off in autarchy or free trade? Owners of land? Workers? Does it matter if they live in Home or in Foreign