Deck 5: Movement of Labor and Capital Between Countries

Question 1

Between 1870 and 1913, labor migration from the "Old World" (Europe) to the "New World" (the United States, Canada, and Australia) caused:

A) real wages to rise faster in the New World.
B) real wages to fall faster in the Old World.
C) real wages to diverge between the New and Old Worlds.
D) real wages to converge between the New and Old Worlds.

Answer 1

D

Question 2

The results of the influx of workers into Miami in 1980 as a consequence of the Mariel boat lift and from Russia to Israel in 1989 after the fall of the Soviet Union:

A) included lower wages in Miami but higher wages in Israel.
B) included lower wages in Israel but higher wages in Miami.
C) surprised most people because there was no reduction in wages in either area.
D) included lower wages in both regions, confirming that immigration hurts domestic workers.

Answer 2

C

Question 3

The short-run model that allows labor to move between industries while keeping other factors fixed is called the ____________ model.

A) Heckscher-Ohlin
B) Ricardian
C) specific-factors
D) purchasing power parity

Answer 3

C

Question 4

The large-scale labor migration that occurred during 1870 to 1913 from Europe to America ____ the growth of wages in the destination nations and ____ the growth of wages in the source nations, thus leading to _____ of wages between the regions.

A) lowered; raised; convergence
B) raised; raised; divergence
C) lowered; lowered; divergence
D) raised; lowered; convergence

Question 5

According to the specific-factors model, what happens when the supply of labor increases?

A) The number of workers employed will decrease.
B) The wages of workers will rise.
C) The marginal product of labor will increase.
D) The wages of workers will decrease.

Question 6

If a person leaves Sweden to work in the United States, she is said to ________from Sweden and __________to the United States.

A) immigrate; emigrate
B) emigrate; immigrate
C) immigrate; immigrate
D) emigrate; emigrate

Question 7

Emigration and immigration are:

A) when workers leave and workers come in.
B) two ways of saying workers are coming in.
C) when workers come in and workers leave.
D) two ways of saying workers leave.

Question 8

In recent years, most immigrants to Europe:

A) migrate for economic reasons, that is, to seek higher wages.
B) are highly educated.
C) enter Europe through Germany.
D) are refugees fleeing war-torn countries.

Question 9

When we use the specific-factors model to study immigration, we assume that:

A) land is immobile internationally but capital and labor are internationally mobile.
B) labor is used to move between countries as well as industries, while still keeping capital and land specific to each industry.
C) land, labor, and capital are internationally mobile.
D) land, labor, and capital are internationally immobile, but capital and land are specific to each industry.

Question 10

The Mariel boat lift of Cuban immigrants into Miami caused the:

A) population of unskilled workers in Miami to decline.
B) population of skilled workers in Miami to decline.
C) supply of unskilled labor to increase, but it did not decrease the wages of other unskilled workers in Miami.
D) wages of all workers to decline.

Question 11

One example of emigration from Europe was during the period between 1870 and 1913. Wages grew rather than declined in the destination nations of the United States, Canada, and Australia. Why?

A) The economic theory did not predict well.
B) Workers from Europe were highly skilled and raised the equilibrium wage.
C) The government stepped in and raised the minimum wage.
D) Wages rose due to the industrial revolution and higher levels of capital but grew more slowly because of the immigration.

Question 12

Examples from Miami and Israel tell us that labor migration sometimes:

A) reduces wages in both the source nation and the destination nation.
B) has no negative effect on wages in the destination nation.
C) increases labor productivity.
D) changes the labor market so that competition for workers rises.

Question 13

To study labor migration using the specific-factors model, we assume ________ and ________ cannot move within the domestic economy, but we allow ________ to move both domestically and internationally.

A) land; capital; labor
B) labor; land; capital
C) land; loanable funds; capital
D) labor; capital; land

Question 14

The specific-factors model predicts that, after immigration, the equilibrium wage in both industries in the destination nation:

A) will rise.
B) will fall.
C) will remain the same.
D) cannot be determined with the information given.

Question 15

Which model can we use to analyze the short-run effects of migration?

A) specific-factors
B) Ricardian
C) Heckscher-Ohlin
D) purchasing power parity

Question 16

Large-scale immigration into the New World, between 1870 and 1913 caused real wages to:

A) decrease in comparison with Europe.
B) increase at a slower pace in comparison with Europe.
C) increase at a higher pace in comparison with Europe.
D) stay constant.

Question 17

When the supply of labor increases, according to the specific-factors model, which of the following is likely to happen?

A) The number of workers employed will decrease.
B) The wages for workers will decline.
C) The marginal product of labor increases in all industries.
D) The overall wage in the economy increases in the short run.

Question 18

During the 1960s and 1970s, some northern European countries actively recruited migrants mainly from Turkey, the former Yugoslavia, Greece, and Italy. In contrast, today most migrants to Europe come from:

A) Iran, India, and Pakistan
B) Syria, Iraq, and Afghanistan
C) Nigeria, Ghana, and Senegal
D) Uzbekistan, Kyrgyzstan, and Tajikistan

Question 19

Between 1870 and 1913, labor migration from the "Old World" (Europe) to the "New World" (the United States, Canada, and Australia):

A) decreased the rate of growth of real wages in the New World and increased the rate of growth of real wages in the Old World.
B) increased the rate of growth of real wages in the New World and decreased the rate of growth of real wages in the Old World.
C) decreased the rate of growth of real wages in both the New and Old Worlds.
D) increased the rate of growth of real wages in both the New and Old Worlds.

Question 20

The immigration of Russian Jews to Israel:

A) increased the population of Israel and caused wages to plummet.
B) decreased the native population of Israel.
C) increased the population of skilled workers but did not decrease wages.
D) caused wages of skilled workers to decrease.

Question 21

What is the likely attitude of owners of capital and land toward immigration?

A) They are likely to support closing the borders to foreign labor.
B) They are likely to support more open borders and an influx of workers.
C) They are not likely to worry about immigration issues,
D) They are likely to reject legislation easing rules on immigration.

Question 22

In the specific-factors model, labor migration from Mexico to the United States will cause _________ in U.S. low-skilled wages and _________ in Mexican low-skilled wages.

A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases

Question 23

In the specific-factors model, emigration causes __________ in the capital-labor ratio and __________ in the return to capital.

A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases

Question 24

What is the Schengen Area?

A) An area consisting of 15 EU countries plus Norway and Switzerland that allows persons to move freely across their borders.
B) An area consisting of 12 South American countries that allows persons to move freely across their borders.
C) An area consisting of 26 EU countries that allows persons to move freely across their borders.
D) An area consisting of Canada, Mexico, and the United States that allows persons to move freely across their borders.

Question 25

Because immigration raises the marginal products of nonlabor factors of production, in the short-run owners of nonlabor resources often support:

A) open borders.
B) tighter restrictions on immigration.
C) controls on the flow of foreign direct investment (FDI).
D) immigration of persons only for humanitarian reasons.

Question 26

In the specific-factors model, migration of labor will cause the wage to:

A) rise in the receiving country and the wage to fall in the sending country.
B) fall in the receiving country and the wage to rise in the sending country.
C) rise in both the receiving and sending countries.
D) fall in both the receiving and sending countries.

Question 27

In the short run, as immigration occurs and more labor is employed, what will happen to the marginal products of land and capital (fixed resources) in the destination country?

A) Neither will be affected.
B) Both will rise.
C) Both will fall.
D) The marginal products of land marginal product of land will rise and the marginal product of capital will fall.

Question 28

In recent years, most migrants to Europe:

A) enter through Germany and France.
B) enter through Italy and Greece, then seek employment in northern European countries.
C) enter through Belgium and the Netherlands, then seek employment in France, Germany, and the United Kingdom.
D) enter through Finland, Norway, and Sweden, then seek employment in Greece, Italy and Spain.

Question 29

In order to analyze migration in the long run, it is appropriate to use:

A) the specific-factors model with free movement of labor across borders.
B) the Heckscher-Ohlin model with free movement of labor across borders.
C) the Ricardian model with no movement of labor across borders.
D) the PPF modified for three goods, three factors of production (all fixed), and three nations.

Question 30

Which is the best approach to analyzing migration in the long run?

A) the specific-factors model with no resource mobility across borders
B) the specific-factors model with free movement of labor across borders
C) the Heckscher-Ohlin model with free movement of labor across borders
D) the Heckscher-Ohlin model with no resource mobility across borders

Question 31

Which of the following events will cause the production possibility frontier to shift outward (to the right)?

A) a natural disaster that causes widespread damage
B) a computer problem that affects all business that rely on computers
C) a wave of immigration caused by new, easier rules
D) a war that destroys the nation's infrastructure

Question 32

Suppose labor and capital are the only two resources used for production. In the long run:

A) both capital and labor can move freely between sectors.
B) only labor can move between sectors.
C) only capital can move between sectors.
D) both capital and labor are blocked from moving between sectors.

Question 33

In the specific-factors model, immigration causes:

A) a rightward shift in the receiving country's production possibilities frontier.
B) a leftward shift in the receiving country's production possibilities frontier.
C) no change in the receiving country's production possibilities frontier.
D) a rightward shift in the sending country's production possibilities frontier.

Question 34

Which legislation would U.S. labor unions support?

A) legislation to eliminate all restrictions on immigration
B) legislation to eliminate direct foreign investment in the United States
C) legislation to heighten restrictions on immigration
D) Labor unions would support all of these measures.

Question 35

In the Heckscher-Ohlin model, how will immigration affect the sending country's production possibilities frontier?

A) It will shift it to the right.
B) It will shift it to the left.
C) It will not affect its production possibilities curve.
D) Immigration will first shift it to the left, then shift it back to its original position.

Question 36

Research by Giovanni Peri and Mette Foged shows that:

A) an influx of lower-wage immigrants tends to raise wages for everyone else.
B) an influx of lower-wage immigrants tends to lower wages for everyone else.
C) an influx of lower-wage immigrants has no effect on wages for everyone else.
D) an influx of lower-wage immigrants tends to cause unemployment of other workers.

Question 37

Suppose labor and capital are the only two resources used for production. In the short run:

A) only capital can move freely between sectors.
B) only labor can move freely between sectors.
C) both capital and labor can move freely between sectors.
D) both resources are restricted in their movement.

Question 38

In the specific-factors model, immigration causes __________ in the capital-labor ratio and __________ in the return to capital.

A) increases; decreases
B) increases; increases
C) decreases; decreases
D) decreases; increases

Question 39

If capital is specific to manufacturing and land is specific to agriculture, then migration of labor from low-income to high-income countries will cause the wage to:

A) rise in the high-income country and the wage to fall in the low-income country.
B) fall in the high-income country and the wage to rise in the low-income country.
C) rise in both the high-income and low-income countries.
D) fall in both the high-income and low-income countries.

Question 40

Proposed European immigration policies are best described as trying to place immigrants:

A) proportionately across all EU countries.
B) mainly in richer EU countries.
C) in select industries.
D) mainly in southern EU countries.

Question 41

Consider an economy that only produces steel and shoes; steel is capital intensive and shoes are labor intensive. How will emigration of labor from this economy affect the marginal productivity of labor in the long run?

A) It will fall.
B) It will not change.
C) It will rise.
D) It will only change in the short run.

Question 42

The H1-B visa program is designed:

A) to keep out undocumented workers.
B) to encourage bright U.S. college students to study abroad.
C) to attract scientists and engineers from other nations to help U.S. industry prosper.
D) to have a way to force foreign students to go back to their native lands after graduation.

Question 43

Consider an economy that only produces steel and shoes; steel is capital intensive and shoes are labor intensive. How will emigration of labor from this economy affect production?

A) Production of both the labor-intensive and the capital-intensive good will rise.
B) Production of both the labor-intensive and capital-intensive good will fall.
C) Production of the labor-intensive good will rise and production of the capital-intensive good will fall.
D) Production of the labor-intensive good will fall and production of the capital-intensive good will rise.

Question 44

How will immigration affect the marginal products and returns to factors of production in the long run?

A) They will not change.
B) They will fall.
C) They will rise.
D) They will only rise in the short run.

Question 45

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 capital-intensive good.
B) a larger decline in the potential output of the labor-intensive good.
C) equal declines in the potential output of both the labor-intensive and the capital-intensive good.
D) a decline in the potential output of the labor-intensive good and an increase in the potential output of the capital-intensive good.

Question 46

Consider an economy that only produces steel and shoes; steel is capital intensive and shoes are labor intensive. Which industry has a lower capital-labor ratio?

A) steel
B) shoes
C) neither steel nor shoes
D) The capital-labor ratios are identical in steel and shoes.

Question 47

In the long run (the Heckscher-Ohlin model), immigration will lead to:

A) an increase in the production of both the labor-intensive and the capital-intensive goods in the receiving country.
B) an increase in the production of the labor-intensive good and a decrease in the production of the capital-intensive good in the receiving country.
C) a decrease in the production of both the labor-intensive and the capital-intensive goods in the receiving country.
D) a decrease in the production of the labor-intensive and an increase in the production of the capital-intensive good in the receiving country.

Question 48

U.S. immigrants from Mexico are mainly _________workers and U.S. immigrants from India are mainly ___________workers.

A) low-skilled; highly skilled
B) middle-income artisans; performance artists
C) male; female
D) younger; older

Question 49

In the long run, immigration will lead to a rightward shift in the receiving country's production possibilities frontier. This shift will:

A) favor the labor-intensive good.
B) favor the capital-intensive good.
C) equally favor the labor-intensive and the capital-intensive good.
D) cause an increase in the production of the labor-intensive good and a decrease in the capital-intensive good.

Question 50

Consider a hypothetical economy in which only computers and shoes are produced and in which computer production is capital intensive and shoe production is labor intensive. If two resources are being used, labor and capital, then the capital-labor ratio would be:

A) higher in the shoe industry.
B) lower in the computer industry.
C) the same in both industries.
D) higher in the computer industry.

Question 51

The combination of legal and illegal immigrants in the United States creates a U-shaped pattern between the number of immigrants and:

A) wages of competing American workers.
B) their wages.
C) their educational level.
D) their jobs.

Question 52

Of the 11% of the U.S. work force with advanced degrees, those who are foreign born make up:

A) 18% of those with Ph.D.'s.
B) less than 10% of those with Master's degrees and Ph.D.'s.
C) 40% of those with Ph.D.'s in science and engineering.
D) 30% of those with Master's degrees.

Question 53

When factors of production are not fixed (as in the long run) and labor immigrates, capital will:

A) remain fixed because capital is never mobile.
B) increase in the capital-intensive industry.
C) move to the higher productivity use in the labor-intensive industry until returns are again equalized.
D) become idled as owners of capital seek more profitable opportunities.

Question 54

What are two major categories of recent U.S. immigrants?

A) male and female
B) young and middle-aged
C) very low-skilled and very highly educated and/or skilled
D) middle-income artisans and performance artists

Question 55

In the United States, what percentage of workers with 12 years of education or less are foreign born?

A) less than 10%
B) 15%
C) 45%
D) 70%

Question 56

Foreign-born workers in the United States tend to:

A) be poorly educated (high school dropouts) or very highly educated (graduate degrees).
B) be mainly very poorly educated.
C) be mainly very highly educated.
D) have educational levels similar to U.S.-born workers.

Question 57

In the long run (the Heckscher-Ohlin model), immigration will lead to:

A) an increase in the wages paid to laborers in the receiving country.
B) an increase in the rent paid to capital- and land-owners in the receiving country.
C) an increase in the rent paid to capital-owners and a decrease in the rent paid to land-owners in the receiving country.
D) no change in the either the wages paid to laborers or the rent paid to capital- and land-owners in the receiving country.

Question 58

In the long run, when there is immigration of labor and all domestic factors of production are mobile:

A) resources move out of the labor-intensive industry into the other sectors of the economy.
B) the excess labor cannot be absorbed into the economy, and eventually workers will seek to emigrate.
C) the excess labor is absorbed, but it raises the unemployment rate and drives down wages, and the owners of capital are the clear winners.
D) the additional labor in the economy is fully employed and the capital-labor ratio in each industry is unchanged

Question 59

In the Heckscher-Ohlin model, a "box diagram" describes the distribution of:

A) output between the two producing sectors in a country.
B) output between the two countries of the model.
C) labor and capital between the two producing sectors of a country.
D) labor between the two countries of the model.

Question 60

Which group of U.S. citizens is most likely to compete with illegal immigrants in the United States?

A) medical doctors
B) high school dropouts
C) college graduates
D) all U.S. citizens

Question 61

Because most immigrants into the United States are either highly skilled or unskilled, the majority of workers:

A) see very little impact on their wages as a result of immigration.
B) have difficulty finding jobs and getting raises because of all the competition from immigrants.
C) feel a big hit on wages and unemployment.
D) must rely on trade adjustment assistance for help retraining and relocating.

Question 62

In the long run (the Heckscher-Ohlin model), immigration will lead to:

A) an increase in the wage and a decrease in the return to capital in the receiving country.
B) an increase in both the wage and the return to capital in the receiving country.
C) a decrease in the wage and an increase in the return to capital in the receiving country.
D) no change in the wage and the return to capital in the receiving country.

Question 63

What is the overall long-run impact of labor immigration on returns to factors of production?

A) Returns to labor will increase and returns to capital will decrease.
B) Returns to labor and returns to capital will both increase.
C) Both relative and absolute returns to factors of production will not change.
D) Both relative and absolute returns to factors of production will increase.

Question 64

According to the Rybczynski theorem, how will immigration of unskilled labor from Mexico to the United States affect the Mexican economy?

A) Mexico's production of capital-intensive products will decrease.
B) Mexico's production of labor-intensive products will decrease.
C) Wages of Mexican workers will increase.
D) Wages of Mexican workers will decrease.

Question 65

What is the name given to the idea that, in a Heckscher-Ohlin model, labor immigration increases output for the labor-intensive industry while reducing output in the capital-intensive industry?

A) Stolper-Samuelson theorem
B) specific-factors model
C) Ricardian model
D) Rybczynski theorem

Question 66

What is the long-run effect of immigration?

A) Output will decrease.
B) Factor prices will increase.
C) Factor prices will decrease.
D) There will be no change in factor prices.

Question 67

Illegal immigrants into the United States tend to compete mainly with:

A) highly educated American workers.
B) poorly educated American workers.
C) all American workers.
D) one another.

Question 68

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 69

In an economy with two industries, what are the long-run effects of increased immigration upon employment in each industry?

A) Employment will increase in both industries.
B) There will be no change in employment in either industry.
C) Employment will increase in one and decrease in the other.
D) Wages will fall in both industries.

Question 70

A corollary to the Rybczynski theorem is that, in the long run, prices of factors will not be affected by an increase in labor. This is known as:

A) the Friedman corollary.
B) the Marshall-Lerner condition.
C) the factor price insensitivity result.
D) the Stolper-Samuelson prediction.

Question 71

In the long run, how will immigration affect the labor-intensive industry's output?

A) It will not change.
B) It will fall.
C) It will rise.
D) It will equal zero.

Question 72

In the long run, which of the following will occur if the U.S. federal government eliminates restrictions on migration of Mexican workers to the United States?

A) The United States' total K/L ratio will rise.
B) Mexico's total K/L ratio will fall.
C) Wages of American workers who compete with Mexican workers for jobs will rise.
D) The returns to U.S. owners of capital will remain unchanged.

Question 73

Immigrants into the United States have the strongest effect on the wages of:

A) college graduates.
B) high school dropouts.
C) high school graduates.
D) one another.

Question 74

According to the Rybczynski theorem, immigration will cause:

A) an increase in the output of the labor-intensive good and a decrease in the output of the capital-intensive good in the receiving country.
B) an increase in the output of both the labor-intensive and the capital-intensive goods in the receiving country.
C) a decrease in the output of the labor-intensive good and an increase in the output of the capital-intensive good in the receiving country.
D) a decrease in the output of both the labor-intensive and the capital-intensive good in the receiving country.

Question 75

What is the long-run effect of immigration on capital use in the receiving country?

A) There will be no change because the remaining capital is not mobile.
B) Capital will move to the capital-intensive industry.
C) The return to capital (rental) will fall.
D) Capital will move to the labor-intensive industry.

Question 76

In the long run (the Heckscher-Ohlin model), immigration will lead to:

A) a rightward shift in the receiving country's production possibilities frontier.
B) a leftward shift in the receiving country's production possibilities frontier.
C) no change in the receiving country's production possibilities frontier.
D) a rightward shift in the sending country's production possibilities frontier.

Question 77

For the sending country, what will be the long-run effects of immigration on wages and the return to capital?

A) The wage will increase, and the return to capital will decrease.
B) The wage will decrease, and the return to capital will increase.
C) Both the wage and the return to capital will increase.
D) There will be no change in the wage and the return to capital.

Question 78

In the Heckscher-Ohlin model with two goods and two factors, an increase in one factor will cause:

A) an increase in the production of the good that uses the factor intensively.
B) a decrease in the production of the good that use the factor intensively.
C) an increase in the production of the good that does not use the factor intensively.
D) no change in the production of either good.

Question 79

Consider a hypothetical economy in which only computers and shoes are produced. If two resources are being used, labor and capital, then any increase in immigration in the long run:

A) will decrease wages in the shoe industry.
B) will decrease wages in the computer industry.
C) will increase wages in the shoe industry.
D) will keep wages constant because marginal products do not change.

Question 80

Which of the following is a long-run impact of labor immigration?

A) Production of labor-intensive industries will increase.
B) Production of capital-intensive industries will increase.
C) There will be a shift of labor and capital into capital-intensive industries.
D) The PPF will shift inward.