Consider a long-run model for a country producing two products (digital cameras and baskets) using two factors (capital and labor).

a. Which good would you expect to be capital-intensive? Which good would you expect to be labor-intensive? Why?

b. Suppose that foreign owners of domestic capital decide to decrease their investment. Illustrate the effects of this change in a box diagram. Does output in each industry increase, decrease, or stay the same? Do wages increase, decrease, or stay the s Suppose a country has two specific factors, land and capital. Land is an input in the production of corn. Capital is used only in the production of rockets. A third factor, labor, is mobile between the two sectors. Holding all else constant, what is the effect of an increase in the amount of available capital in the short run