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Pla Is and food (clothing with capital (K) and labor (Lo); food with land (7) and labor (LF)). Capital and land are fixed factors while

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Pla Is and food (clothing with capital (K) and labor (Lo); food with land (7) and labor (LF)). Capital and land are fixed factors while labor can move between sectors (Lo + LF = L). The production technology in each sector demonstrates constant returns to scale with diminishing returns of marginal product of each factor and factor complementarity. Consumers in this economy exhibit homothetic preferences. (a) Characterize an autarky equilibrium for Cruztopia. (b) Graphically represent the autarky equilibrium with quantity of production in clothing Qc on the x-axis and quantity of production in food QF on the y-axis. T Cruztopia opens up to free trade and observes a relative world price (P.) . Let us further assume that the relative world price is higher than in the autarky relative price, Pc Po A PF PF

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