SPECIFIC FACTORS MODEL. ONLY ANSWER PART D.

Assume that England is endowed with land (T), cows (C) and labor (L). Land can be allocated to production of dairy (D) or wheat (W). Assume endowments of cows (C) and labor (L) are 150 each. England's total land (T) is 600. Cows (C) are specific to the dairy sector and labor (L) is specific to the wheat sector. The marginal products are given as: MPTD = C/T and MPTW = L/T. The autarky relative price of wheat to dairy is 2. a. How is the land allocated between the dairy and the wheat sectors in autarky? Draw a graph to illustrate the allocation of land in equilibrium. Be sure to label all axes and curves. b. Suppose England has comparative advantage in producing wheat. When England opens up to trade with France will the relative price of wheat increase, decrease, or stay the same? Why? c. How does the land allocation between the dairy and wheat sectors change when England opens up to trade with France? Show your answer in the graph above and provide a brief explanation. d. Suppose that due to mad cow disease the cow stock in England diminishes significantly. What will happen to England's PPF? Depict the new and old PPF. Carefully explain the mechanism using the graph below. Make sure to label the axes.