Question

1)Mkt. for farm workers. Many farm workers working on US farms are seasonal migrants. The government imposes stricter immigration rules that make it make difficult to travel between countries. The new rules affect supply/demand (choose one). Show the effect of new immigration rules on the US labor market for farm workers. Equilibrium wage___, equilibrium employment____ 2)Typical US farm. Consider a perfectly competitive American farm before the introduction of the new immigration rules. These are the long‐run marginal and average cost curves and the demand. Show the effect of the new immigration rules on the farm’s profit maximizing decision.   The rules affects the cost functions/demand (choose one).   On the graph, (1) label the cost functions; (2) Indicate the new profit maximizing level of output q*; 3) Show the profit/loss.   Indicate whether the farm make a profit/loss (choose one) Mkt. for American farm products. Aggregating individuals farms’ responses, the change in labor market for farm workers affects supply/demand of American farm products because ______________________________.   Show the effect of the change immigration rules. Equilibrium price___, equilibrium quantity____ 4)Mkt. for imported farm products. The change in the price of American farm products affect supply/demand of imported farm products because_________________  . Show the effect of the change in the price of American farm products. Equilibrium price___, equilibrium quantity__  

Answer 1

# 1) When govt. Imposes stricter immigration rule for migrant farm workers between countries, it affects supply of workers. The supply of farm workers will decrease.

Effect of new immigration rules on US farm labor market-------

From the above graph, we find that initial Equilibrium is determined as Point E when demand for farm workers (Dw) curve intersects the Supply of farm workars ( Sw) curve.

But after stricter immigration rule, the Sw curve shifts leftwards, due to which the Equilibrium wage rate ( W¹) is determined below initial wage rate (W)

Similarly labour Employment for farms also determined as ( L¹) against the initial employment(L)

Equilibrium wage--- rises

Equilibrium Employment -- Decreases

2) In case of perfectly Competitive firm, the normal price prevails in the market in the long run, this is the reason, under perfect competition, firms earn just normal profits in the long run.

See graph--------

The graph shows long run, AC curve ,( U shaped) demand curve ( AR=MR) .Long run MC curve (LMC)M cuts MR from below , determining equlibrium Quantity and Equilibrium price of an individual firm under perfect competition.

Graph showing effect of immigration law on individual farm's curve in the short run--------

1

*SHORT RUN INDUSTRY EQUILIBRIUM AFTER IMPOSITION OF IMMIGRATION LAW-----

As we find in graph, due to less supply of farm labor, the supply of farm products decreases, due to which the Supply curve shifts leftwards, which makes new equlibrium price P¹ higher than the initial Equilibrium price P for farm products.

* EFFECT OF IMMIGRATION LAW ON INDIVIDUAL FARM----

On the right hand side graph, we find that the individual farm in the short run determines equlibrium quantity q¹ and Equilibrium price AR¹ ,higher than earlier price ( being a price taker firm).

3)So, the firm in the short run enjoys super profits ( shaded area) as we find that SAC<AR¹

After immigration rule, the Equilibrium price for farm products increases and Equilibrium Quantity also Increases in the short run.,so the firm enjoys super prifits in the short run on its farm products.

4) EFFECT ON MARKET FOR IMPORTED FARM PRODUCTS---------

The demand for imported farm produce will rise and demand curve for such products will shift rightward.

See graph-----

When the US consumers start buying the imported farm products, the short run profits of individual farms will vanish and again they will turn to earn normal profits .,as the Equilibrium price will again go down and Equilibrium quantity will again decrease.

Increase in the price of US farm products will increase the demand for imported products because due to higher price domestically, S<D, people will start buying imported farm products to meet their demand and thus demand for imported products increases.