Question

Suppose that workers immigrate to Minnesota from Canada. Which of the following correctly describes what would happen in the market for labor in Minnesota?

a. The equilibrium wage would increase, and the quantity of labor would increase. With more workers, the added output from an extra worker is larger.
b. The equilibrium wage would decrease, and the quantity of labor would decrease. With fewer workers, the added output from an extra worker is smaller.
c. The equilibrium wage would decrease, and the quantity of labor would increase. With more workers, the added output from an extra worker is smaller.
d. The equilibrium wage would decrease, and the quantity of labor would increase. With more workers, the added output from an extra worker is larger.

Answer 1

If workers immigrate from Canada to Minnesota, the equilibrium wage would decrease and the quantity of labor would increase.

Step-by-step explanation:

In the market for labor in Minnesota, if workers immigrate from Canada, the equilibrium wage would decrease, and the quantity of labor would increase. With more workers, the added output from an extra worker is smaller.

The demand for labor would increase due to the additional workers, which would initially lower the equilibrium wage. However, the increase in the quantity of labor would also lead to a decrease in the added output from an extra worker, resulting in a smaller decrease in the equilibrium wage.

Answer 2

The correct answer is option c.

Explanation:

As more workers migrate to Minnesota from Canada, the population of workers in Minnesota will increase. This will lead to a rightward shift in the labor supply curve.

This consequently leads to a decline in the equilibrium wages as the quantity of labor supplied will be higher than the quantity of labor demanded. So wages will fall and the quantity of labor will increase.

With an increase in the quantity of workers, the added output from an extra worker is smaller as the increased quantity of workers are using the fixed quantity of capital.