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Consider a labor market where the demand for a particular category of labor is given by the equation LD = 20 – 2W. Suppose that the supply curve of workers in this market who are also native-born citizens is given by LN = 2W, while the supply curve of immigrants in this market is given by LI = W, where L represents the number of workers, W is the wage expressed in real terms, and the subscripts D, N, and I are used to distinguish between the quantity of labor demanded and the quantity of labor supplied by native-born and immigrant workers. Answer the following 3 questions.

a. Find the market-clearing wage and employment level assuming immigration is not allowed.

b. Find the market-clearing wage and employment level after allowing for immigration. (Hint: you may find it useful to sketch the curves first, though this is not necessary). How many native jobs are lost to immigrants?

c. Compute the total earnings of native-native-born workers in this market before and after immigration. How much is their earnings reduced?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91694845

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