Q. In Foreign and Home there are two factors of production, land and labor, used to produce only one good. The land supply in each country and the technology of production are exactly similar. The marginal product of labor in each country rely on employment as follows:
Number of Workers Marginal product
Employed of Last Worker
1 30
2 29
3 28
4 27
5 26
6 25
7 24
8 23
9 22
10 21
11 20
Originally there are 11 workers employed in Home but only 3 workers in Foreign. Find the effect of free movement of labor from the high wage to the low wage country. When such economic migration ceases, what will be the levels of production, the income of landowners and real wages in each country?
Answer: The total production in the world will enhance since the addition to production the marginal product of labour in the target country is larger for each worker than the loss of production as well the marginal product of workers in the emigration country. The actual wages will go up in the emigration country and fall in the immigration country. Landlord incomes will go up in the immigration country and fall in the emigration country.