1. Consider a country with SH skilled workers and Uч unskilled workers. There are two final goods, indexed by 0 and 1, and the respective production functions are Fo(S,U)= min{S, U}, F₁(S,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 w€ {0,1} and write us and wu for skilled and unskilled wages. a. Suppose po/P1 > 2. Set up a diagram with the unit-revenue curves for this economy and show the possible factor prices (ws, wu) implied by this diagram, assuming that both goods are produced. b. In the context of a, determine output and factor prices when 0 < SH < Uн. Do the same for the case SH > UH > 0. c. Suppose po/p1 < 2. Set up a diagram with the unit-revenue curves for this economy and show what will happen given any factor endowments SH > 0 and UH > 0. What do you know about factor prices in this case? d. Show the production possibility set for this economy and confirm the conclusions about output you reached in a, b and c.

Fig: 1