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Consider two economies with identical
production functions Y =
AK
αLαTα
where α = ⅓. A = 1 for both economies. Economy U
has 64 units of K, 64 units of L and 125 units of
T; Economy V has 64 units of K, 64 units
of L and 64 units of T. K and L
are mobile, but T (think of it as land) is immobile.

(a)     How much
are the factor prices (MPK and MPL and
MPT) in each economy when factors are immobile?

(b)     Now suppose
K (but not L) is free to move. In which direction
will the flows take place, and when will they cease?

(c)     Now suppose
L (but not K) is free to move. In which direction
will the flows take place, and when will they cease? Compare and
contrast the equilibria in (b) and (c) above.