Suppose we have two cities: Philadelphia and Pittsburgh. Individuals expect to live 10 years, face an interest rate of 0% per year and have to pay $10 to move. Workers in each city have a yearly labour supply given by h*(w) = 5 (e.g., workers always work 5 'hours' a year). Firms face competitive input and output markets and the yearly

production technology of firms in each city is:

f(k,l)=2l

Firms get $10 per unit produced (so wages will be yearly). Suppose that both Philadelphia and Pittsburgh have 100 workers and 20 firms. Suppose 50 new workers appear in Philadelphia.

Q. What would be the wages in Philadelphia and Pittsburgh without internal migration? Would Pittsburgh's wage fall by more or less than 10 cents under internal migration (compared to no migration)?