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3 Analysis and Calculation (30%. 2 questions with 15 points each.) 1. Consider a numerical example of two-country, two-sector, and two-good model. There are two sectors in the economy, the manufacturing sector and the agricultural sector. In the short run, the agricultural sector uses only labor and land, while the manu- facturing sector uses only capital and labor. Table 2 shows the information observed in both sectors in the short run. (in million $) Manufacture Sector Agricultural Sector Sales revenue 100 100 Payment to labor 25 50 Payments to capital 75 Payments to land 50 Table 2: Payments to the production factors in the short-run In manufacturing sector, the percentage of decreases in price: 2PM = -20% In agricultural sector, the percentage does not change in price: PA = 0% In both sector, percentage of decreases in the wage - = -10% (a) Calculate out the change on the Rental for Capital (ARK) (RX ) and the change on the Rental for Land (H,T (b) Determine the relationship between the value of APM, AW ARK, ART (), Is it consistent with the prediction of the Specific-factor model? RK RT