Use the accompanying table for Neon and Zeon to answer the questions that follow. Assume that the
Question:
a. Which country has the greater stock of capital and technological prowess? How can you tell?
b. Suppose the equilibrium wage rate is $19 in Neon and $7 in Zeon. What is the domestic output (= domestic income) in the two countries?
c. Assuming zero migration costs and initial wage rates of $19 in Neon and $7 in Zeon, how many workers will move to Neon? Why will not more than that number of workers move to Neon?
d. After the move of workers, what will the equilibrium wage rate be in each country? What will the domestic output be after the migration? What is the amount of the combined gain in domestic output produced by the migration? Which country will gain output; which will lose output? How will the income of native-born workers be affected in eachcountry?
Step by Step Answer:
Economics
ISBN: 978-0073375694
18th edition
Authors: Campbell R. McConnell, Stanley L. Brue, Sean M. Flynn