Question: Figure is a supply and demand diagram for the world labor market. Starting at points A and A* , consider a situation in which some Foreign workers migrate to Home but not enough to reach the equilibrium with full migration (point B). As a result of the migration, the Home wage decreases from W to W′′ > W′, and the Foreign wage increases from W* to W** <>
a. Are there gains that accrue to the Home country? If so, redraw the graph and identify the magnitude of the gains for each country. If not, say why not.
b. Are there gains that accrue to the Foreign country? If so, again show the magnitude of these gains in the diagram and also show the world gains.
