Question

1. Economic theory predicts that increased immigration:

A. always reduces domestic employment in every labor market.

B. raises domestic employment in every labor market.

C. may either increase or decrease domestic employment in a specific labor market.

D. has no effect on domestic employment.

2. For a firm operating in perfectly competitive output and labor markets, an optimal level of labor is used in the short run when:

A. MRP = w

B. MRP = MFC

C. P x MP = W

D. All of the above are correct.

Answer 1

1. A. always reduces domestic employment in every labor market. Immigrant labor is ready to work at low wages and thus bargaining power of domestic workers weaken and they are replaced with low wage immigrants.
2. D. All of the above are correct. Perfectly competitive markets hire labor till their wage rate is equal to the value of marginal product. And the output is at the point where marginal factor cost intersects marginal revenue product from above. At equilibrium, all these values are equal.