Show me the steps to solve 5.
Home produces two goods, computers and wheat, for which capital is specific to computers, land is specific to wheat, and labour is mobile between the two industries. Home has 100 workers and 100 units of capital but only 10 units of land.
a. Draw a graph with the output of wheat on the vertical axis and the labour in wheat on the horizontal axis. What is the relationship between the output of wheat and the marginal product of labour in the wheat industry as more labour is used?
b. Draw the production possibilities frontier for Home with wheat on the horizontal axis and computers on the vertical axis.
c. Explain how the price of wheat relative to computers is determined in the absence of trade.
d. Draw a figure with the amount of labour used in wheat measuring from left to right along the horizontal axis and the amount of labour used in computers moving in the reverse direction.
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