Consider a two-country model of immigration where one country has a near-zero labour demand curve. Suppose half of the combined labour force is in each country. Assume the other country has a higher value-of-marginal-product of labour schedule for every level of labour input. Label the following diagram showing the wages in each country (1 mark)

Now interpret the two countries as a single economy with the country with the high value-of-marginal-product of labour being the cohort of men in the workforce and the other country being the cohort of women in home production (running a household) in the same economy. Comment on the labour movement and do a standard welfare analysis of the resultant move. (2 marks)

Now suppose that the two countries represent a conquering-and-then-colonizing (European) nation and a country without Western technology (and a low value-of-marginal-product curve as a result). Assume that conquest leads to the establishment of an organized labour market, and more efficient (from a Western capitalist point of view) economy, so that the value-of-marginal product schedule in the colonized country rises. It rises so high that workers want to leave the conquering-and-then-colonizing country and go to the colonized country. Do a standard welfare analysis. (2 marks). Start the welfare analysis before conquest and before the value-of-marginal product curve rises, and compare with the situation after it rises and workers reallocate from the colonizing country.

Explain why the area under the labour demand curve is a measure of country-wide social welfare in mainstream economic analysis. Comment on the ethical appropriateness of this. (1 mark)

Make one argument for, and one argument against, using wages as a measure of welfare of indigenous Australians in the period after colonization. (2 marks)

Make one argument for, and one argument against, encouraging women (or men) to leave home production for the sake increasing economic output. (2 marks)