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
Rahul Sunny answered 2 years agoRelated 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...
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