LABOR ECONOMICS (LL+ACCESS)
LABOR ECONOMICS (LL+ACCESS)
8th Edition
ISBN: 9781264909339
Author: BORJAS
Publisher: MCG
Question
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Chapter 8, Problem 15P

(a)

To determine

Determine why a source country experiences both an outflow of low-skilled workers and an outflow of high-skill workers at a time.

(b)

To determine

Graphically illustrate the returns to skill in the destination and source countries.

(c)

To determine

Determine how the social and economic policies encourage both types of flows.

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Use a game tree to illustrate why an aircraft manufacturer may price below the current marginal cost in the short run if it has a steep learning curve.   ​(Hint​: Show that learning by doing lowers its cost in the second​ period.) Part 2 Assume for simplicity the game tree is illustrated in the figure to the right. Pricing below marginal cost reduces profits but gives the incumbent a cost advantage over potential rivals. What is the subgame perfect Nash​ equilibrium?
Answer
M” method  Given the following model, solve by the method of “M”. (see image)
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