Dr. Joel is a doctor in a large metropolitan city in the United States. He earns $100, 000/yr and plans on working three more years and then retiring. A remote, rural town in the state in which he resides is in desperate need of a doctor and offers Dr. Joel the job. If Dr. Joel moves, he will still only work for three years (thereby not adjusting his retirement plans). He would incur $15,000 in psychic costs if he moves due to the disutility he experiences from moving to such a remote location. Dr. Joel's discount rate is 5%.
1. What is the minimum annual salary that the remote town must pay Dr. Joel per year for him to accept its job offer?
2. Assume the labor demand for unskilled workers in a city in Texas is given by Ld = 80 - 2w. The labor supply curve of natives (i.e., non-immigrants) is given by Ls = -20 + 8w, where w is the hourly wage.
(a) Calculate the equilibrium level of employment and wage rate if there are no immigrants.
(b) Suppose the arrival of Mexican immigrants shifts out the labor supply curve to Ls0 = -5+8w. Calculate the new equilibrium level of employment and wage rate.
(c) What has happened to the employment level of natives as a result of the immigrant arrival? What has happened to the unemployment rate of unskilled native workers?
Dr. Joel is a doctor in a large metropolitan city in the United States. He earns $100, 000/yr and plans on working three more years and then retiring. A remote, rural town in the state in which he resides is in desperate need of a doctor and offers Dr. Joel the job. If Dr. Joel moves, he will still only work for three years (thereby not adjusting his retirement plans). He would incur $15,000 in psychic costs if he moves due to the disutility he experiences from moving to such a remote location. Dr. Joel's discount rate is 5%.
1. What is the minimum annual salary that the remote town must pay Dr. Joel per year for him to accept its job offer?
2. Assume the labor demand for unskilled workers in a city in Texas is given by Ld = 80 - 2w. The labor supply curve of natives (i.e., non-immigrants) is given by Ls = -20 + 8w, where w is the hourly wage.
(a) Calculate the equilibrium level of employment and wage rate if there are no immigrants.
(b) Suppose the arrival of Mexican immigrants shifts out the labor supply curve to Ls0 = -5+8w. Calculate the new equilibrium level of employment and wage rate.
(c) What has happened to the employment level of natives as a result of the immigrant arrival? What has happened to the unemployment rate of unskilled native workers?
