Business, 16.04.2020 23:43 poohnia

Suppose we have two cities: Seattle and Los Angeles. Individuals expect to live 10 years and face an interest rate of 0% per year. Workers in each city have a yearly labour supply given by h(w) = 8 (e. g., workers always work 8 hours a year). Firms face competitive input and output markets and the yearly production technology of firms in each city is f(k, l) = 2√ l and firms get $20 per unit produced. Suppose that both Seattle and Los Angeles have 100 workers and 25 firms. Suppose that 50 workers in Los Angeles suddenly decide to "find themselves" in nature and so leave the city to live in the forest (i. e., they disappear from our economy).

After the mass exodus of people from Los Angeles, what will wages in Seattle and Los Angeles be if people cannot move?

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Suppose we have two cities: Seattle and Los Angeles. Individuals expect to live 10 years and face an...

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