Question

In: Economics

An economy consists of two regions, the North and the South. The short-run elasticity of labor...

An economy consists of two regions, the North and the South. The short-run elasticity of labor demand in each region is -0.5. Labor supply is perfectly inelastic within both regions. The labor market is initially in an economywide equilibrium, with 600,000 people employed in the North and 400,000 people in the South at wage of $15 per hour. Suddenly, 20,000 people immigrate from abroad and initially settle in the South. They possessed the same skills as the native residents and also supply their labor inelastically.

(a) What will be the effect of this immigration on wages in each of the regions in the short run (before any migration between the North and the South occurs)?

(b) Suppose 1,000 native-born persons per year migrate from the South to the North in response to every dollar differential in the hourly wage between the two regions. What will be the ratio of wages in the two regions after the first-year native labor responds to the entry of the immigrants?

(c) What will be the effect of this immigration on wages and employment in each of region in the long-run (after native workers respond by moving across regions to take advantage of whatever wage differentials may exist)? What are the equilibrium levels of employment and wage in both regions? Assume labor demand does not change in either region.

Solutions

Expert Solution

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Markey Corporation consists of two divisions, North and South. The North makes Glop, a product that...
Markey Corporation consists of two divisions, North and South. The North makes Glop, a product that can be used in the production of the product that the South division makes and sells. Both divisions are considered profit centers. The following data are available concerning Glop and the two divisions: North South Average units produced 150,000 Average units sold 150,000 Variable manufacturing cost per unit $2 Variable finishing cost per unit $5 Fixed divisional costs $75,000 $125,000 The North Division can...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 937,500 $ 750,000 $ 187,500 Variable expenses 637,500 600,000 37,500 Contribution margin 300,000 150,000 150,000 Traceable fixed expenses 142,000 71,000 71,000 Segment margin 158,000 $ 79,000 $ 79,000 Common fixed expenses 62,000 Net operating income $ 96,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 937,500 $ 750,000 $ 187,500 Variable expenses 637,500 600,000 37,500 Contribution margin 300,000 150,000 150,000 Traceable fixed expenses 152,000 76,000 76,000 Segment margin 148,000 $ 74,000 $ 74,000 Common fixed expenses 64,000 Net operating income $ 84,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement shown below: Total Company North South   Sales $ 1,156,250 $ 925,000   $ 231,250     Variable expenses 786,250   740,000   46,250     Contribution margin 370,000   185,000   185,000     Traceable fixed expenses 156,000   78,000   78,000     Segment margin 214,000   $ 107,000   $ 107,000     Common fixed expenses 68,000     Net operating income $ 146,000   Required: 1. Compute the companywide break-even point in dollar sales .                2. Compute the...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 937,500 $ 750,000 $ 187,500 Variable expenses 637,500 600,000 37,500 Contribution margin 300,000 150,000 150,000 Traceable fixed expenses 152,000 76,000 76,000 Segment margin 148,000 $ 74,000 $ 74,000 Common fixed expenses 64,000 Net operating income $ 84,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement shown below: Total Company North South Sales $ 812,500 $ 650,000 $ 162,500 Variable expenses 552,500 520,000 32,500 Contribution margin 260,000 130,000 130,000 Traceable fixed expenses 134,000 67,000 67,000 Segment margin 126,000 $ 63,000 $ 63,000 Common fixed expenses 54,000 Net operating income $ 72,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format...
Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown: Total Company North South Sales $ 825,000 $ 550,000 $ 275,000 Variable expenses 495,000 385,000 110,000 Contribution margin 330,000 165,000 165,000 Traceable fixed expenses 144,000 72,000 72,000 Segment margin 186,000 $ 93,000 $ 93,000 Common fixed expenses 64,000 Net operating income $ 122,000 Required: 1. Compute the companywide break-even point in dollar sales. 2. Compute the break-even point in...
Many regions in North and South Carolina and Georgia have experienced rapid population growth over the...
Many regions in North and South Carolina and Georgia have experienced rapid population growth over the last 10 years. It is expected that the growth will continue over the next 10 years. This has motivated many of the large grocery store chains to build new stores in the region. The Kelley’s Super Grocery Stores Inc. chain is no exception. The director of planning for Kelley’s Super Grocery Stores wants to study adding more stores in this region. He believes there...
Many regions in North and South Carolina and Georgia have experienced rapid population growth over the...
Many regions in North and South Carolina and Georgia have experienced rapid population growth over the last 10 years. It is expected that the growth will continue over the next 10 years. This has motivated many of the large grocery store chains to build new stores in the region. The Kelley’s Super Grocery Stores Inc. chain is no exception. The director of planning for Kelley’s Super Grocery Stores wants to study adding more stores in this region. He believes there...
Many regions in North and South Carolina and Georgia have experienced rapid population growth over the...
Many regions in North and South Carolina and Georgia have experienced rapid population growth over the last 10 years. It is expected that the growth will continue over the next 10 years. This has motivated many of the large grocery store chains to build new stores in the region. The Kelley’s Super Grocery Stores Inc. chain is no exception. The director of planning for Kelley’s Super Grocery Stores wants to study adding more stores in this region. He believes there...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT