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Question 5: Economic Geography (Lecture 6) Consider the naive model of economic geography in lecture 6 (slides 1922). Suppose the marginal product of labor in
Question 5: Economic Geography (Lecture 6) Consider the naive model of economic geography in lecture 6 (slides 1922). Suppose the marginal product of labor in sector B features increasing return for L 3 6 [0,1525] as indicated by the gure below.| (a) How many equilibrium if the relative position of the marginal product of labour of sector A and B is given by the gure? (b) Are all the equilibriums stable? If not, Why? (0) Suppose the economy is currently at the nonstable equilibrium. Now consider a small positive productivity shock which increases the marginal product of sector B. How does the shock affect the allocation of labour
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