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I really have a question for C and D I do not have a strong understanding 3. Assume that a country is endowed with Land
I really have a question for C and D I do not have a strong understanding
3. Assume that a country is endowed with Land (T), Labor (L) and Capital (K). Land can be allocated to production of Food (F) or Manufactured Goods (M). Assume endowment of K and L are 100 each. The country's total Land, is T=400 = TF + TM. Assume further that labor, L, is specific to the food sector and capital, K, is specific to the manufactured goods sector. Marginal products are given as: M PTF= L/Tr and MPTM= KfTM. Assume PF: 1, PM: 3 a) Draw a graph to illustrate the allocation of land in equilibrium. Your graph should have two vertical axes, one representing price of land in the food sector (tF), and one representing price of land in the manufactured goods sector (no). The allocation of land, T, will be on the horizontal 3X85 . b) Calculate TM and T; and indicate this land distribution on your graph. What is the price of land in this economy? c) If both prices increase 100% i. ii. iii. iv. V Calculate the new land distribution and price of land. Show your answer graphically. Has output of F and M changed? What happens to the real wage of workers? What happens to the real return to capital? What happens to the real return to landowners? d) If the price of manufactured goods' Increases to 4 and the price of food does not change, calculate the new land distribution between sectors. Show your answer graphically. e) Based on your answer to part c and d, under what conditions will land allocation changeStep by Step Solution
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