What is the market-clearing wage with open borders

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Assume that labor demand for low-skilled workers in the United States is: w = 24 – 0.1E where E is the number of workers (in millions) and w is the hourly wage. Assume there are currently 120 million domestic U.S. low-skilled workers who supply labor in elastically. If the U.S. opened its borders to immigration, 20 million low-skilled workers would enter the U.S. and supply labor in elastically.

a. What is the market-clearing wage if immigration is not allowed?

b. What is the market-clearing wage with open borders?

c. How much is the immigration surplus when the U.S. opens its borders? How much surplus is transferred from domestic workers to domestic firms?

Reference no: EM13885977

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