Questions 1. Suppose there are two countries, Home and Foreign. Both countries produce cars and houses. The production of cars requires capital (K), and labor (Lo). The production of houses requires land (T) and labor Ly. Two countries share the same technology and production functions for cars and houses are as: Qc = KOLBS; QH = TOLAS (a) derive the marginal product of labor for both sectors (S, ic {C, H)). (b) Suppose the Home country has 600 labor, 500 capital, 100 land; the autarkic price of cars prome = $1, the price of houses phone phome = $1, calculate the autarkic home labor market equilib rium (aka. equilibrium wage and labor allocation) (c) Draw the scissors diagram based on your calculation. (label: p; x MPL;, i 6 {C, H) , wage equilibrium, and labor allocation) (d) Suppose the foreign autarkic price ratio of cars vs. houses is:pc is: Foreign /Foreign = 2, without any calculation, by inspecting the autarkic relative price of cars at Home and Foreign, can you make any conjecture on their trade patterns if the two countries were to engage in free trade with each other? (e) Suppose after trade the world price ratio : pc pworld/PH pworld is bigger than the home autarkic price ratio: pa Home/pHome, will capital, land, labor win or lose from trade? Show it clearly on the scissors graph. (you will need to label the areas for winners and losers on the graph before and after the relative price changes) (f) Suppose now the minimum wage is $0.6, calculate the total short-run unemployment in the economy