Question: 2. (40) Specic Factors Model. There are two countries, Singapore and the United States. The two sectors are agriculture and business services. Agriculture requires regular

2. (40) Specic Factors Model. There are two countries, Singapore and the United States. The two sectors are agriculture and business services. Agriculture requires regular labor and land for production. Business services requires regular labor and high-skilled labor for production. Land is specic to agriculture, and high-skilled labor is specic to business services. Only regular labor can work in either sector. a. (4) Singapore is a country that consists of a single city (Singapore). Hence, there is very little land. What do you think is Singapore's comparative advantage sector? Type your response here: b. (8) Below is the value of marginal product of labor diagram for Singapore: Wage, VMPL VM PL VM PL for for 3% business services _,_____+_ 4F#F____.#_ D_ag 0_bu5 serv Regular Labor When the U.S. and Singapore open up to trade, what happens to the relative price of business services in Singapore? Explain. Type your response here: e. (4) What happens to the wage (not the real wage, just the wage on the diagram) of regular labor in Singapore? Type your response here: 11. (4) What happens to the allocation of regular labor in the two sectors in Singapore? Type your response here

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