Question: Use the information given here to answer the following questions: Manufacturing: Sales revenue = P M Q M = 150 Payments to labor = W

Use the information given here to answer the following questions:

Manufacturing:

Sales revenue = P_M Q_M= 150

Payments to labor = W L_M= 100

Payments to capital = R_K K = 50

Agriculture: Sales revenue = P_A Q_A= 150

Payments to labor = W L_A= 50

Payments to land =R_T T = 100

Holding the price of manufacturing constant, suppose the increase in the price of agriculture is 20% and the increase in the wage is 10%.

a. Determine the impact of the increase in the price of agriculture on the rental on land and the rental on capital.

b. Explain what has happened to the real rental on land and the real rental on capital.

c. Now, let assume that instead of the situation given above, the price of manufacturing were to fall by 20%, would landowners or capital owners be better off? Explain.

d. How would the decrease in the price of manufacturing affect labor? Explain

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