231_final_exam

231_final_exam - Part B: Answer any FOUR from the following...

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1. In Home and Foreign there are two factors of production, land and labor, used to produce only one good. The land supply in each country and the technology of production are exactly the same. The marginal product of labor in each country depends on employment as follows: Number of Workers Employed Marginal Product of Last Worker 1 20 2 19 3 18 4 17 5 16 6 15 7 14 8 13 9 12 10 11 11 10 Initially there are 11 workers employed in Home but only 3 workers in Foreign. (a) Find the effect of free movement of labor from the high wage to the low wage country. When such economic migration ceases, what will be the levels of production, real wages and the income of landowners in each country? (2.5 marks) (b) Assume now that Foreign limits immigration, so that only 2 workers can move there from Home. Calculate how the movement of these two workers affects the income of five different groups: (i) Workers who were originally in Foreign. (ii) Foreign landowners.
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231_final_exam - Part B: Answer any FOUR from the following...

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