Neon Workers Wage Rate = MRP Domestic Output and Income 1 $21 $ 21 2 19 40 (= 21 + 19) 17 57 (= 21 + 19 + 17) 4 15 72 5 13 85 6 11 96 7 9 105 Zeon Workers Wage Rate = MRP Domestic Output and Income $15 $15 2 13 28 (= 15 + 13) 3 11 39 (= 15 + 13 + 11) 4 48 5 7 55 6. 5 60 7 3 63
Use the accompanying tables for Neon and Zeon to answer the questions that follow. Assume that the wage rate shown equals hourly output and income, and that the accumulated output and income are the sum of the marginal revenue products (MRPs) of each worker. 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 each country?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
