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

Quizplus · Accepted Answer

When there is immigration of labor and all domestic factors of production are mobile, the excess labor is fully absorbed and the capital-labor ratio in each industry remains unchanged. This occurs because as the immigrant labor enters the economy, it increases the supply of labor, which in turn leads to a decrease in the wage rate. This decrease in the wage rate makes it cheaper for firms to hire labor, which results in an increase in the demand for labor. As a result, the immigrant labor is fully employed, and the capital-labor ratio is unchanged.

In the Long Run, When There Is Immigration of Labor