Using XY-pc in LyXSuppose there are two goods in the world economy: rice (R) and shampoo (S). All countries have the21same production technologies with production functions: YR = L3 K3 and YS =...

Using XY-pc in LyXSuppose there are two goods in the world economy: rice (R) and shampoo (S). All countries have the21same production technologies with production functions: YR = L3 K3 and YS = L0.5K0.5 Considerthe case of a single country, Mexico, which is endowed with 100 workers and 100 units of capital.a) Which sector is capital-intensive?b) Suppose the equilibrium wage-rental rate w is 3 . Solve for the labor-capital ratios LR and LSr2 KR KSc) Solve for the equilibrium capital and labor used in each sector.d) Now suppose that Mexico receives 20 units of Foreign Direct Investment from the US. What are the new labor-capital ratios LR and LS ? (Assume that world prices do not change.) KR KSe) What are the new levels of capital and labor employed by each sector?f) Without calculating actual quantities produced, can you tell whether Mexico’s production of rice has increased or decreased? Can you tell whether Mexico’s production of shampoo has increased or decreased? Explain.g) Now use the production functions and a calculator to solve for the actual quantities produced of each good before and after FDI. Do your results confirm your conclusion in the previous part? What theorem does this illustrate? Explain.RR SS1put a boxDepartment of Economics Spring 2017 University of California, Berkeley Economics 181h) After receiving the FDI from the US, Mexico now receives immigration from Central America. How much immigration does Mexico need to receive such that its new production of rice is the same as it was (before the FDI from the US)?i) Suppose that a hurricane in Central America causes much more labor immigration into Mexico than in the previous part so that Mexico now has an endowment of 360 workers to go with its 120 units of capital. What are the levels of capital and labor used in each sector? Assuming that international goods prices have not changed, are workers in Mexico better off than before immigration? Are capital-owners better off than before immigration? Explain the differences between this case and the previous ones.