Question 1

1. Consider a country with 33 skilled workers and U3 unskilled workers. There are two nal goods, indexed by 0 and 1, and the respective production functions are me, U) = min{S, U}, F168, U) = S + U. Essentially, workers must work in a team of one skilled worker and one unskilled worker to produce good 0, and they can produce good 1 by themselves. Write pw for the price of good u: E {0, 1} and write my and my for skilled and unskilled wages. :1. Suppose Jog/p; > 2. Set up a. diagram with the unit-revenue curves for this economy and show the possible factor prices (103,100) implied by this diagram, assuming that both goods are produced. in. In the contact of :1, determine output and factor prices when 0 UH>Q c. Suppose pro/p1 0 and UH > 0. What do you know about factor prices in this case? d. Show the production possibility set for this economy and conrm the conclusions about output you reached in a, b and c