Image transcription text Question 1 Consider the Lewis model of dual economy. In the following diagram, labour unit is taken on the horizontal axis and

Image transcription text Question 1 Consider the Lewis model of dual economy. In the following diagram, labour unit is
taken on the horizontal axis and marginal product of labour on the vertical axis. Going right from
0M gives modern sector employment and going left from OR gives rural sector employment. The
curve MPR is the marginal product curve of rural sector and wage w is wage paid in the modern
sector. The curve A1B1 is the modern sector marginal product curve in period 1. A1
Bl
m
0M OR For the following questions, you can draw additional diagrams if needed. (a) [4 points] Consider period 1. Determine the amount of labour the modern sector firm
employs, the total output, cost of labour and its profit in period 1. (b) [5 points] Briefly explaining the process of capital accumulation, in the diagram determine
what happens (in terms of marginal product, labour employment in the two sectors) in a future
period T that corresponds to the "turning point" of the economy. (c) [5 points] Determine what happens (in terms of marginal product, labour employment in the
two sectors) in a future neriod T + 1 that is after the neriod T of turning noint.