3 Specific Factors Model [3 pts] In an economy characterized by the specific factor model, it produces good 1 using labor and land and good 2using labor and capital. The total supply of labor (L) is...

3 Specific Factors Model [3 pts] In an economy characterized by the specific factor model, it produces good 1 using labor and land and good 2using labor and capital. The total supply of labor (L) is 9000 units. The total supply of land (T) is 8000 unitsand the total supply of capital is 1000 (K) units.The production function of good 1 is Q1 = L2/3 T 1/3 , marginal productivity of labor of MPL1 = 32 L?1/3 T 1/3 .The production function of good 2 is Q2 = 2L2/3 K 1/3 , marginal productivity of labor of MPL2 = 34 L?1/3 K 1/3. Suppose the price of good 1 (P1 ) is $1 and the price of good 2 (P2 ) is $0.5.a) Determine the equilibrium wage rate and the allocation of labor between the two sectors [2 pt]b) Determine the equilibrium output of each good. Confirm graphically that the slope of the production possibilityfrontier at that point equals the relative price. [0.5 pt]c) Suppose P1 increases to 1.5. What happens to the income of the workers, the capitalists and the landownersrespectively? Explain why. [0.5 pt] 1