Consider a hypothetical economy in which only computers and shoes are produced and in which computer production is capital intensive compared with shoe production. If two resources are being used, labor and capital, then any increase in immigration in the long run:
A) will cause the capital-labor ratio to increase in the computer industry.
B) will cause the capital-labor ratio to increase in the shoe industry.
C) will cause the capital-labor ratio to increase in both the industries.
D) will increase the number of workers employed in the shoe industry.

Question

Quizplus · Accepted Answer

In the long run, an increase in immigration will increase the labor supply. Given that shoe production is less capital intensive and presumably more labor-intensive compared to computer production, the shoe industry is likely to absorb a significant portion of this increased labor supply, leading to an increase in the number of workers employed in the shoe industry. The capital-labor ratio in the industries would not necessarily increase just because of immigration; it would depend on how capital is subsequently allocated.

Consider a Hypothetical Economy in Which Only Computers and Shoes