In the long run, immigration will shift the sending
Country's production possibilities frontier inward.This
Shift will cause:
A)a larger decline in the potential output of the capitalintensive good.
B)a larger decline in the potential output of the labor intensive good.
C)equal declines in the potential output of both the laborintensive and the capitalintensive good.
D)a decline in the potential output of the labor intensive good and an increase in the potential output
Of the capitalintensive good.

Question

In the long run, immigration will shift the sending
Country's production possibilities frontier inward.This
Shift will cause:
A)a larger decline in the potential output of the capital­intensive good.
B)a larger decline in the potential output of the labor­ intensive good.
C)equal declines in the potential output of both the labor­intensive and the capital­intensive good.
D)a decline in the potential output of the labor­ intensive good and an increase in the potential output
Of the capital­intensive good.

Quizplus · Accepted Answer

Immigration usually increases the supply of labor which leads to a decrease in its wage rate. This shift in factor prices makes the production of labor-intensive goods relatively cheaper than capital-intensive ones. As a result, firms will shift their production towards labor-intensive goods, causing a decline in potential output of capital-intensive goods and a larger decline in the potential output of labor-intensive goods. Therefore, (B) is the best choice.

In the Long Run, Immigration Will Shift the Sending