1. Assuming labor and capital move freely across the international boarders:

a. predict what would happen in short-run to the wages, return to capital, labor distribution across sectors, quantity of the product that each sector produces if a country enacts a free-trade and free international immigration policy. Draw the home labor market equilibrium graph and show the impact of the immigration on wages and labor distribution between the two sectors of the economy. Explain your answer.

b. predict what would happen in long-run to the prices and the quantity of the product produces to the wages, return to capital, labor distribution across sectors, quantity the product that each sector produces if a country enacts a free-trade, free capital flow policy and experiences an increase in the capital stock in the long run. Draw the allocation of labor and capital in a box diagram with an increase in the capital stock in the long run. Explain your answer.

2. Using the Monopolistic Competition model

a. Draw a graph with short-run monopolistic competition equilibrium with trade. predict what would happen in short-run to the prices and the quantity of the product produces if a country enacts a free-trade. Explain your answer.

b. Draw a graph with long-run monopolistic competition equilibrium with trade. Predict what would happen in long-run to the prices and the quantity of the product produces if a country enacts a free-trade. Explain your answer.

Answer rating: 100% (QA)

a The impacts of immigration on the labor market critically depend on the skills of migrants the skills of existing workers and the characteristics of the host economy They also differ between the sho... View the full answer