Suppose we have two cities: Miami and Atlanta. Individuals expect to live 10 years, face an interest rate of 0% per year. Workers in each city have a yearly labour supply given by h(w)-8 (e. g., workers always work 8 hours a year). Firms face competitive input and output markets and the yearly production technology of firms in each city is f(k, l) - 2vl and firms get $10 per unit produced. Suppose that both Miami and Atlanta have 50 workers and 16 firms. Suppose that there is an immigration wave (in period 1 raising the labour supply of Miami by 50 workers. (a): After the immigration wave in Miami, what will wages in Miami and Atlanta be if people cannot move?
(b): After the immigration wave in Miami, w $1.75 if people face a moving cost of $3 wages in Atlanta be higher or lower than $1.75 if people face a moving cost of $3?