1. Consider the one good model we analyzed in class. The marginal product of labor for the home and foreign country are described by the equations below. The labor force of the home country is L = 400 and the labor force for the foreign country is L* = 200. Denote labor employed in each country as LE and LE respectively. a. Assume initially that labor is immobile across countries. Draw the labor market diagram, where the horizontal axis is total world labor supply. Show the employment of labor in each country and calculate the wage for each country. b. Allow labor to be completely mobile across countries. Compute the exact employment for each
1. Consider the one good model we analyzed in class. The marginal product of labor for the home and foreign country are described by the equations below. The labor force of the home country is L = 400 and the labor force for the foreign country is L* = 200. Denote labor employed in each country as LE and LE respectively. a. Assume initially that labor is immobile across countries. Draw the labor market diagram, where the horizontal axis is total world labor supply. Show the employment of labor in each country and calculate the wage for each country. b. Allow labor to be completely mobile across countries. Compute the exact employment for each
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:1. Consider the one good model we analyzed in class. The marginal product of labor for the home and
foreign country are described by the equations below. The labor force of the home country is L
the labor force for the foreign country is L* = 200. Denote labor employed in each country as LĘ and L;
respectively.
a. Assume initially that labor is immobile across countries. Draw the labor market diagram, where the
horizontal axis is total world labor supply. Show the employment of labor in each country and calculate
the wage for each country.
b. Allow labor to be completely mobile across countries. Compute the exact employment for each
country, and calculate the equilibrium wage rate. Show the allocation of labor and the wage rate on the
diagram. State the number who migrated and the direction of the migration. Also show the gain for each
country resulting from the immigration. Briefly explain.
c. Calculate the gain for each country resulting from the immigration.
400 and
MPL = 1800– 3LĘ
(1)
MPL* = 800 – 2L;
(2)
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