Question

Consider a hypothetical economy in which onlycomputers and shoes are produced and in whichcomputer production is capital intensive compared withshoe production. If two resources are being used, laborand capital, then any increase in immigration in thelong run:
A. will cause the capital­labor ratio to increase in thecomputer industry.
B. will cause the capital­labor ratio to increase in theshoe industry.
C. will cause the capital­labor ratio to increase in boththe industries.
D. will increase the number of workers employed in theshoe industry

Answer 1

Answer:

The correct answer is (D)

Explanation:

In a hypothetical economy, the increase in immigration, in the long run, will increase the number of workers in the shoe industry. The shoe industry is less capital intensive compared to the computer industry, which is why immigration will increase the number of workers in the shoe industry because it is more labour incentive. The other reason is the demand for labour in the computer industry is less because it is capital intensive industry.