Question: 4. (35 points) This question is a computational question on the Specific Factors model. We consider a small country operating in autarky. There are two
4. (35 points) This question is a computational question on the Specific Factors model. We consider a small country operating in autarky. There are two final goods, motors (M) and avocadoes (A). There are three types of labour used in production: general-purpose labour which is used in both industries, high-skilled labour which is used only in production of motors, and low-skilled labour which is used only in production of avocadoes. The technologies for producing the goods in the small country are given by: QM = (GM) .3 (S) .7 QA = (GA) .3 (L) .7 , where GM and GA are input of general labour into motors production and avocadoes production respectively; and S and L are the supplies of high-skilled labour and low-skilled labour respectively. Let the wage of high-skilled workers be denoted wS, the wage of low-skilled workers as w
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