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Suppose that in the island country, there are a large number of identical rms. Both the product market and the labor market are perfectly competitive.
Suppose that in the island country, there are a large number of identical rms. Both the product market and the labor market are perfectly competitive. Each rm has the following production function: g = m + 111(5)?\" + 513.- + 10) 111(10), where En is the employment of native workers and E} is the employment of migrant workers. Which of the following statements is correct? (a) Native workers and migrant workers are perfect complements in the production process. A sudden increase in E;- lowers native employment in the short run as well as in the long run. (b) Native workers and migrant workers are imperfect complements in the produc tion process. A sudden increase in Ea lowers native employment in the short run but not in the long run. (c) Native workers and migrant workers are perfect substitutes in the production process. A sudden increase in E;- lowers native employment in the short run but not in the long run. (d) Native workers and migrant workers are perfect substitutes in the production process. A sudden increase in Ez- lowers native employment in the long run but not in the short run. (e) Because of the increasing return to scale, a sudden increase in Ei has no impact on the labor market of this country
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