Suppose that labor and capital are both supplied perfectly inelastically to the U.S. economy.
a. Show the producers' surplus earned by capital on a graph of the marginal product of labor. Explain where you make use of the fact that the supply of capital is perfectly inelastic.
b. Suppose that General Motors moves one of its plants to South Korea, increasing the number of workers who can be combined with U.S. capital. Show the gains and losses to (1) U.S. workers, (2) U.S. owners of capital, and (3) South Korean workers.
c. Does the plant's relocation help or hurt Americans as a whole?