A New York Times article observed that the wage of farmworkers in Mexico was $11 an hour but the wage of immigrant Mexican farmworkers in California was $9 an hour. ‘a. Assume that the output sells for the same price in the two countries. Does this imply that the marginal product of labor of farmworkers is higher in Mexico or in California? Explain your answer, and illustrate with a diagram that shows the demand and supply curves for labor in the respective markets. In your diagram, assume that the quantity supplied of labor for any given wage rate is the same for Mexican farmworkers as it is for immigrant Mexican farmworkers in California.

b. Now suppose that farmwork in Mexico is more arduous and more dangerous than farmwork in California. As a result, the quantity supplied of labor for any given wage rate is not the same for Mexican farmworkers as it is for immigrant Mexican farmworkers in California. How does this change your answer to part a? What concept best accounts for the difference between wage rates for Mexican farmworkers and immigrant Mexican farmworkers in California?

c. Illustrate your answer to part b with a diagram. In this diagram, assume that the quantity of labor demanded for any given wage rate is the same for Mexican employers as it is for Californian employers. Kendra is the owner of Wholesome Farms, a commercial dairy. Kendra employs labor, land, and capital. In her operations, Kendra can substitute between the amount of labor she employs and the amount of capital she employs. That is, to produce the same quantity of output she can use more labor and less capital; similarly, to produce the same quantity of output she can use less labor and more capital. Let w* represent the annual cost of labor in the market, let r ;* represent the annual cost of a unit of land in the market, and let rx* represent the annual cost of a unit of capital in the market. ‘a. Suppose that Kendra can maximize her profits by employing less labor and more capital than she is currently using but the same amount of land. What three conditions must now hold for Kendra’s operations (involving her value of the marginal product of labor, land, and capital) for this to be true?

b. Kendra believes that she can increase her profits by renting and using more land. However, if she uses more land, she must use more of both labor and capital; if she uses less land, she can use less of both labor and capital. What three conditions must hold (involving her value of the marginal product of labor, land, and capital) for this to be true?