Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

There are a total of 700 units of labor in the economy, and workers can either seek employment in one of two sectors: Sector 1

image text in transcribed
There are a total of 700 units of labor in the economy, and workers can either seek employment in one of two sectors: Sector 1 or Sector 2. The graph below depicts the marginal revenue product curves for both sectors in the economy before the introduction of international trade. Wage. ...L.. $26 - $26 $24 $22 $22 $20 $18 MRP $16 MRP L... P..- $16 100 200 300 400 500 600 700 Part ((): Suppose that the marginal product of the 200th unit of labor in Sector 1 is 4 units of output. That is, hiring the 200" unit of labor in Sector 1 increases the quantity of output by 4 units in that sector. What is the price of output sold in sector 1? Part (ii): Suppose that per-unit price of output sold in Sector 2 is $8. What is the marginal product of the 200" unit of labor that is employed in Sector 2? Part (ili): Identify the allocation of the 700 workers such that there is no incentive for additional migration between the two sectors. Part (iv): Suppose that the country begins to export the product sold by Sector 2, and as a result, 100 workers migrate from Sector 1 to Sector 2. By how much did exporting increase the marginal revenue product of each unit of labor in Sector 2? Part (v): Suppose that the country begins to export the product sold by Sector 2, and as a result, 100 workers migrate from Sector 1 to Sector 2. By how much does the equilibrium wage rise in each sector? Part (vi): Exporting leads the marginal revenue product of labor curve in the agricultural sector to shift upward. What is the source of this upward shift

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Public Administration And Law

Authors: David H Rosenbloom, Rosemary O'Leary, Joshua M Chanin

3rd Edition

1439803986, 9781439803981

More Books

Students also viewed these Economics questions