If immigration were to lead to an inflow of workers so that the overall labor force were to rise to L1, then ?

Question

a. wages would rise and payments to capital would fall.

b. wages would fall and payments to capital would rise.

c. wages would rise and payments to capital would rise.

d. wages would fall and payments to capital would fall.

Answer 1

Depends on your graph.

b. immigration were to lead to an inflow of workers so that the overall labor.

Higher supply of labor leads to decrease in equilibrium wages. As more cheaper labor is employed MPL will fall too, but depending on demand for labor W will in general fall but slower than MPL. Thus higher MPK/R is required to produce maintain equilibrium.

But actually depends on scenario - sometimes more cheaper labor doesn't boosts growth and actually there just substitution of capital by labor leading to fall in demand for capital.

Q-32 here: http://astro.temple.edu/~shakim/document...