One of the main differences between the production functions in the traditional and modern sectors of the Lewis model is that the marginal product of labor in the agricultural (traditional) sector is always increasing at a decreasing rate above some level of agricultural employment. is zero above some level of agricultural employment. is always decreasing. becomes negative above some level of agricultural employment.Question 18 (2 points) Suppose there are only two goods produced in the world: DVDs, which are traded internationally, and hair cuts, which are not. Assume that transport costs are negligible. The table shows information on the production and prices of DVDs and hair cuts in the USA and China, (where ) is the symbol for the Chinese currency, Renminbi): DVDs per capita Hair Cuts per Price of DVDs Price of Hair capita Cuts USA 9 4 $2 $4 China 3 4 V10 Y10 Using the US basket of goods, the purchasing power parity exchange rate is O $1 = Y2.06 O $1 = V1.89 O $1 = 10.26 O $1 = V3.85Consider a Hecksher-Dhlin world economv with two countries [China and the USA}, two goodsa'services being produced [manufactured goods and financial services}, and two factors of production {high and low skilled labour]. Suppose the financial sector uses high-skilled labour relativelv more intensively:r and the ratio of the number of high to low skilled workers is higher in the US than China. if the world moves from autarkv to free trade, we would expect to see that 0 workers in everv sector in both countries would be better off. 0 workers in the US financial sector and the Chinese manufacturing sector would be worse off. 0 in both countries, workers in the financial sector would be better off and those in the manufacturing sector would be worse off. 0 workers in the US manufacturing sector and the Chinese financial sector would be worse off. Consider an economy that can be described by a basic Solow model. Output per worker is given by y = 3k3 where k denotes capital per worker. The savings rate is S = 0. 2, the population growth rate is 72 - 0. 05 and the rate of depreciation is o = 0. 1. It follows that the steady-state capital stock per worker is OK* = 16. OK* = 0.5. OK* = 4. O k* = 8