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. The following question is based on the international factor movement problem ( Lecture 9 ) . Suppose the domestic production function is Y =

. The following question is based on the international factor movement problem
(Lecture 9). Suppose the domestic production function is Y=10K0.5L0.5.
(1) We first assume a closed economy. The domestic market has 50 units of labor and 200
units of capital. When oversea capital movement is permitted, 150 units of capital move
from home to abroad, until domestic and foreign rental rates are equalized. Please
calculate the domestic rental rate r after the capital movement. (Hint: you need to write
down the expression of MPK)]

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