1. Given the production function in equation (1), explain the CMP for a given plant. Clearly describe the goal, the choice variables, the exogenous variables, and the constraint. Describe the notable economic relationships that solve the CMP.

Rent- Rent.p C( ww/,P.S=1 C(W.W, p. 9) = 1 Vw.pk V(wy.p) Cw.wp.)1 C(w,.,.P.S=1 rent in B rent in B p' rent in A rent in A w wage wage wage in A N w wage in B in B in A HION EDUCATION LOW EDUCATION FIGURE 1. EQUILIBRIUM WAGES AND RENT IN Two CITIES Notes: Point 1 is the equilibrium in city A. Point 2 is the equilibrium in city B without externality. Point 3 is the equilibrium in city B with externality. The dashed lines in both panels are the isocost curves in city B without externality, w, and w, are the nominal wages of educated and uneducated workers, respectively