/quizquiz action takeQuiz&quiz; probGuid-QNAPC The following graph shows labor m

Question

/quizquiz action takeQuiz&quiz; probGuid-QNAPC The following graph shows labor markets In the United States and Mexico. The horizontal axls denotes the total quantity of labor in each country, and the vertical axils deplcts the wages pald to labor. For each country, the demand edule for labor is represented by the value of the marginal product (VMP) of labor. Initially, the labor supply in the United States Is 16 million workers, Sou.s., and 24 milion workers in Mexico, SOMex Tool tip: Mouse over the curves, areas, and points to see their coordinates. United States Mexico WAGE (Dollars 20 s1 16 16 12 12 16 24 32 40 Suppose the United States and Mexico are in isolation, so that labor cannot move freely following table by determining total labor income, total income, and each nation's income accruing to owners of in both

Explanation / Answer

Consider the given problem, here in USA the initial equilibrium wage be “W=10” and “Le=16”.

So, the labor income is given by the area “a+b”, “W*Le = 10*16 = 160”.

Now, capital income is given by the “c”, => “(1/2)*16*(18-10) = 8*8=64”.

So, the Toatl income in USA is given by “a+b+c”, =160+64=224”.

Now, in Mexico the initial equilibrium wage be “W=2” and “Le=24”.

So, the labor income is given by the area “f+g”, “W*Le = 2*24 = 48”.

Now, capital income is given by the “h+i+j”, => “(1/2)*24*(14-2) = 12*12=144”.

So, the total income in Mexico is given by “f+g+h+i+j”, =48+144=192”.

Now, as the migration is allowed in USA the new equilibrium wage be “W=6” and “Le=24”.

So, the labor income is given by the area “a+d”, “W*Le = 6*24 = 144”.

Now, capital income is given by the “b+c+e”, => “(1/2)*24*(18-6) = 12*12=144”.

So, the Toatl income in USA is given by “a+b+c+d+e”, =144+144=288”.

Which => because of the migration the “total income” in USA increases.

Now, as the migration is allowed in Mexico the new equilibrium wage be “W=6” and “Le=16”.

So, the labor income is given by the area “f+h”, => “W*Le = 6*16 = 96”.

Now, capital income is given by the “j”, => “(1/2)*16*(14-6) = 8*8=64”.

So, the total income in Mexico is given by “f+h+j”, =64+96=160”.

Which => because of the migration the “total income” in Mexico decreases.

but the Over all income increases form "224+192=416" to "288+160=448".

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