Recall from the lectures that the first fundamental welfare theorem states that equilibrium in competitive markets is Pareto Optimal. The second fundamental welfare theorem states that any Pareto efficient allocation can be achieve by the competitive equilibrium with the appropriate redistribution of initial endowments.

Now consider a situation of a small country that is considering opening to international trade. You are the leader of this country and your economists are telling you that if you open up to international trade, the natural resource sector will gain over a billion dollars in annual revenue. However, your economists are also telling you that the manufacturing sector will lose half a billion in revenue.

With what you have learned so far in this course and in the economics program, what decision would you make? Make sure to make some reference to competitive markets and logic expressed in the first and second welfare theorem.

For the regression model Y: = {5'0 + 6;. Derive the least squares estimator of 50 for this model and Prove that the least squares estimator of 30 obtained is unbiased. Consider the simple linear model, Y= a + B X + e with e~ N(0, 03) in zt=1xt2 0.2 ?=1(Xi-X)2 e usual notation. Prove that Var(a) = Let y= X B + e, where X IS an n>