Consider the Labor Situation in Countries I and II in a Two-Country

Multiple Choice

Consider the labor situation in countries I and II in a two-country world with the marginal Physical product schedules MPPL_I (= demand for labor schedule D_I) for country I and Marginal physical product schedule MPPL_II (= demand for labor schedule D_II) for country II shown in the graph below (where the vertical axes also represent real wages) :

Without any migration of labor between the two countries, the labor force is 0L₁ in country I and (in the leftward direction) 0'L₁ in country II. If labor is now allowed to flow freely between the two countries, labor would migrate __________. As a result of the migration, world output would increase by the amount of triangle __________.

A) from country I to country II; CBA
B) from country I to country II; FBA
C) from country II to country I; CFA
D) from country II to country I; CBA