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Movement of labor from a foreign country to the domestic​ (home) economy:
 
a) occurs only if the marginal product of labor is higher in foreign than at home.
b) increases the marginal product of labor at home.
c) increases the marginal product of labor in foreign.
d) leaves the marginal product of land unchanged in both countries.

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Vaishali Yadav
Vaishali YadavLv10
19 Sep 2020

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Related questions

What is the impact of movement of labor from a foreign country to the domestic (home) economy?

Consider the following production function using capital (K) and labor (L) as inputs. Y = 10.K0.5L0.5. The marginal product of labor is (MPL=) 5.K0.5/L0.5, and the marginal product of capital (MPK) = 5.L0.5/K0.5.

a. If K = 100 and L=100 what is the level of output Y?

b. If labor increases to 110 while K=100, what is the level of output?

c. If labor increases to 110 while K=100, what is the marginal product of labor?

d. If labor increases to 120 while K=100, what is the marginal product of labor?

e. What happens to the marginal product of labor when labor increases while capital remains unchanged?

f. Estimate Marginal Products of Capital in the above cases of (c) and (d) using the equation given in the question.

g. When labor increases from 100 to 110 and then to 120 while the level of capital does not change, what happens to the Marginal Product of Capital?

Suppose that two countries in a two-country-two-factor-two-commodity model have identical and homothetic tastes, have identical endowments of labor and have the same technology in the capital-intensive industry. However the foreign country has a larger endowment of capital than the home country and has a Hicks-neutral technological advantage over the home country in the production of the labor-intensive commodity, product 1. [Hint: A Hicks-neutral technological advantage shifts the isoquants up without changing their shape and thus marginal rate of substitution along any ray from the origin, i.e., λX1 = λf(K,L) where λ is the degree of the technological change in product 1.]

(i) What is the pattern of trade between the two countries if we also know that, in autarky, the wage-rental ratio is higher in the foreign country than it is in the home country? Explain as carefully as you can each step of your reasoning. In order to solve this problem, break down the problem in two sub-questions, (i) what happens if there is no technological difference and differences only with respect to endowments, and (ii) what happens if there is no difference in endowments and the only difference is about technology.

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