Question

In Home and Foreign, there are two factors each of production, land and labor, used to produce only one good. The land supply in each country and the technology of production are exactly the same. The marginal product of labor in each country depends on employment as follows:

Number of Workers Employed	Marginal Product of Last Worker
1	20
2	19
3	18
4	17
5	16
6	15
7	14
8	13
9	12
10	11
11	10

Initially, there are 11 workers employed in Home, but only 3 workers in Foreign. Assume now that Foreign limits immigration so that only three workers can move there from Home. Calculate how the movement of these three workers affects the income of five different groups.

What is impact on workers who were originally in Foreign? The wage in Foreign changes from ______ Blank 1 to ______ Blank 2.

What is impact on Foreign landowners is to change costs? The costs in Foreign landowners change from ______ Blank 3 to ______ Blank 4.

What is impact on workers who stay in Home? Workers who stay at home benefit as their wage changes from ______ Blank 5 to ______ Blank 6.

What is impact on Home landowners? Landowners in Home are hurt as their costs change from ______ Blank 7 to ______ Blank 8 for each worker employed.

What is impact on the workers who do move? The workers who do move benefit by seeing their wages change rise from ______ Blank 9 to ______ Blank 10.

What is the total production in two countries? The total production in two countries changes from ______ Blank 11 to ______ Blank 12.

Answer 1

The Marginal product of last labour is the wage in Market.

So initially In foreign the wage was 18. And in home wage was 11.

After movement, the workers in foreign is 3+3=6 and worker in home is 11-3=8

So wage in foreign=15 and wage in home is 13.

Blank 1=18

Blank 2=15

Blank 3 =18*3=54

Blank 4=15*6=90

Blank 5=10

Blank 6=13

Blank 7=10

Blank 8=13

Blank 9=10

Blank 10=15

Initial production in home=20+19+18+17+16+15+14+13+12+11+10=165

Foreign production=20+19+18=57

Blank 11=165+57=222

Production in home after movement=20+19+18+17+16+15+14+13=132

Foreign production=20+19+18+17+16+15=105

Blank 12=132+105=237