ECON 3HH3 Chapter Notes - Chapter 5: Mariel Boatlift, Mid-Levels, Real Wages

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harlequinwildebeest854

21 Apr 2018

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Chapter 5 notes movement of labour and capital between countries. The prices of goods themselves are determined by supply and demand in world markets. Treat the prices of goods as fixed, home wage and rentals paid to capital and land changes as labor moves between countries. Effects of immigrations in the short run: specific-factors model. Short run : labor is mobile among home industries but land and capital are fixed. Downward sloping because as more labor is used in manufacturing the mpl in the industries declines and wages fall. The graph of pa*mpla for agriculture is upward-sloping because measure labor used in agriculture la for right to left: as more labor is used in agriculture the mpl in agriculture falls and wages fall. Equilibrium wage is a the intersection of the mp curves. Wages are equal in 2 sectors so there is not reason for labor to move between them. Effect of immigration of the wage in home.

Related Questions

Suppose there are two countries in the world, Canmerica, and Chinam, that initially have no economic interaction. The wage rate in Canmerica is $20 per hour and the annual rate of return on capital investment is 10%. The wage rate in Chinam is $5 per hour and the annual rate of return on capital investment is 25%.

a) If workers have equal skills in both countries, what might account for the differences between returns to labor and capital in the two countries?

b) If the two countries decide to drop barriers to the labor movement and the labor movement is costless, what will happen to labor and capital compensation in these two countries (account for wins and who loses and the net gain or loss to open migration)?

c) If the countries maintain barriers to migration but allow for free movement of capital and goods, how will your answer to (b) change (assume the movement of capital and goods is also free)?

lemonrhinoceros219

The home produces two goods, computers and wheat. Capital is specific to computers, the land is specific to wheat, and labor is mobile between the two industries. Home has 100 workers and 100 units of capital but only 10 units of land. Foreign also produces computers and wheat using capital, which is specific to computers; land, which is specific to wheat; and labor, which is mobile between the two sectors. Foreign also has 100 workers but instead has 100 units of land and only 10 units of capital. It has the same production functions as at Home.

Clearly indicate the correct answer in italics for the following question:

The no-trade price of wheat will be higher/lower in Home than in Foreign because Home has more, fewer units of land than Foreign. The no-trade price of computers will be higher/lower in Home than in Foreign because Home has more, fewer units of capital than Foreign.

If the trade is opened, with trade the relative price of wheat will increase/decrease in Home and increase/decrease in Foreign. If the trade is opened, the rental on capital will increase/decrease at Home and the rental on land will increase/decrease in Foreign.

redantelope979

Question:

Is it true that in a short-run production process, the marginal cost curve eventually slopes upward because firms have to pay workers a higher wage rate as they produce more output? Explain your answer.

Answer:

The marginal product of labor is the increase in output resulting from a one-unit increase in the amount of labor employed. In my own opinion, the statement can be true in the sense that, as the firm produces more and more the cost of production has to come down first; that becomes constant or minimum and then starts to increase. The marginal cost is also a U-shaped curve that first falls then reaches a minimum and starts rising. The reason for rising marginal costs in the short term will only be an increase in the wages as the only factor which is variable in the short-run is labor whereas all factors are kept fixed, so the fixed costs will keep coming down. If you increase labor, you are going to suffer from diminishing marginal returns. And in the long-run, one will suffer diminishing returns from both input factors, labor, and capital.

The short-run cost relationship between the marginal product of labor and the marginal cost, the labor is variable. We have already established that there are diminishing marginal returns because the labor decreases. To increase output in the short-run, a firm must increase the amount used of a variable input. The marginal product reduces, not because consecutive workers are lesser, but because more workers are being used relative to the amount of equipment that is available, what they have left to work with. An example; if a clinic has only one dentist on duty and several assistants are available and we have a lot of patients waiting to see that doctor, the number of patients served by this office cannot increase without limit. The excess assistants will not be able to increase the number of patients in the office, not because they are not reliable or good enough, but because they cannot perform the doctor's job, and there is only one doctor in the office.

https://www.quora.com/Why-does-the-marginal-cost-curve-slope-upwards

I need a peer reply for this.

amethystwhale496

ECON 3HH3 Chapter Notes - Chapter 5: Mariel Boatlift, Mid-Levels, Real Wages

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