Consider a two-region model for the two countries of Econoland and Socioland in which both have...

 

Transcribed Image Text:

Consider a two-region model for the two countries of Econoland and Socioland in which both have "frictionless" migration (i.e., workers can move freely between the two countries without facing any costs). Suppose that Econoland has a marginal product of labour (MPL) curve given by W = 7 - L and Socioland has a marginal product of labour (MPL) curve given by Ws = 7-0.5L, where L stands for labour. i. Draw and label the MPL curves for each country on the graph below. Hint: Econoland's origin is on the left and Socioland's origin is on the right. (2 points) WE Ws OE ii. Identify and label the labour market equilibrium (i.e., the efficient allocation of labour) for Econoland and Socioland on the graph above. How many units of labour does each country use and at what wage? (2 points) iii. Identify and label the labour market equilibrium (i.e., the inefficient allocation of labour) for Econoland and Socioland on graph above if Econoland implements a net fiscal benefit (NFB) of $3 per unit of labour. How many units of labour does each country use and at what wage? (3 points) Consider a two-region model for the two countries of Econoland and Socioland in which both have "frictionless" migration (i.e., workers can move freely between the two countries without facing any costs). Suppose that Econoland has a marginal product of labour (MPL) curve given by W = 7 - L and Socioland has a marginal product of labour (MPL) curve given by Ws = 7-0.5L, where L stands for labour. i. Draw and label the MPL curves for each country on the graph below. Hint: Econoland's origin is on the left and Socioland's origin is on the right. (2 points) WE Ws OE ii. Identify and label the labour market equilibrium (i.e., the efficient allocation of labour) for Econoland and Socioland on the graph above. How many units of labour does each country use and at what wage? (2 points) iii. Identify and label the labour market equilibrium (i.e., the inefficient allocation of labour) for Econoland and Socioland on graph above if Econoland implements a net fiscal benefit (NFB) of $3 per unit of labour. How many units of labour does each country use and at what wage? (3 points)

Answer rating: 100% (QA)

Econoland uses 4 units of labor at a wage of 3 and Socioland uses 14 units of labor at a wage of 0 i ... View the full answer