Assume that labor demand for low-skilled workers in the United States is: w = 24 – 0.1E where E is the number of workers (in millions) and w is the hourly wage. Assume there are currently 120 million domestic U.S. low-skilled workers who supply labor in elastically. If the U.S. opened its borders to immigration, 20 million low-skilled workers would enter the U.S. and supply labor in elastically.
a. What is the market-clearing wage if immigration is not allowed?
b. What is the market-clearing wage with open borders?
c. How much is the immigration surplus when the U.S. opens its borders? How much surplus is transferred from domestic workers to domestic firms?