Minikistan is a small, private ownership economy. There is only one homogenous good, wheat, which is produced using labor and seeds of wheat alone. Land is in abundant supply, and is not considered to be a scarce good. Currently the following data is being observed in Minikistan: output per labor, q, is 25; investment per labor, i, is 10; and consumption per labor, c, is 15. The technology in use in Minikistan's wheat production admits that the ongoing capital-labor ratio, k, is 5. a) Consider the classical characterization (i,e,, neo-Ricardian and neo-Marxian) of the Minikistanian economy where (i) workers' wages are driven to subsistence consumption; (ii) workers do not save; and (iii) capitalists do not consume. Under these conditions, b) State the capital output ratio, v; and the labor output ratio, lq. Given that the wage rate (wages per labor) is equal to consumption per labor, find the profit rate in Minikistan. c) Using information you derived thus far, find the prevailing growth rate in Minikistan. Check the macro equilibrium using the demand-supply balance. Portray the Marxian equilibrium of this economy in a 4-quadrant graph of w, r, g, and c. In particular, what is the exploitation rate? Important observations: Observe that under the neoclassical growth rate of output per capita is driven to zero. In class we have seen that this outcome is due to diminishing returns to capital. This assumption on the neoclassical production function leads to falling rate of profit; hence, rate of capital accumulation, which otherwise is the only source of growth in this model, ceases and becomes nil under the golden rule steady state. It has to be recalled that the hypothesis of the falling rate of profit is also a central component of the Marxian model, though it originates not because of the technological properties (diminishing returns) of a production function, but from the social relations of competition. In Marx, the falling rate of profit follows from cut-throat, intensive competition among capitalists, which leads to rise of the organic composition of capital. As capital intensity increases, labor embedded in the valuation of the product falls; therefore the exploitation rate also falls. Thus, in Marx the tendency for the profit rate to fall is due to falling rate of exploitation, rather than diminishing returns to capital along a production function as in the neoclassical world. Finally, observe that in this model, Marxian growth is ensured by the fact that: it = k++1 > kt. In the neoclassical model, on the other hand, i = sf(k). (Recall that this is a very important distinguishing assumption of the neoclassical paradigm) Since, under the neoclassical steady state sf(k) = Sk, and we also have k+1 = (1-8)kt + it, with 8 = 1, we have it =k+1=kt. Thus, capital accumulation has stopped under the neoclassical steady state. But, with it = k+1>kt Marxian equilibrium growth is always positive