Q2. Suppose the wage ratio of skilled labor v.s. unskilled labor, wH/wL, is highest in country A, intermediate in country B, and lowest in country C, and country C's production involves two stages/tasks, the skilled-labor intensive R&D and the unskilled-labor intensive components. (a) To which country should country C offshore its component production so that country C's output is maximized? (b) Use a PPF-indifference curve graph with components on the X axis and R&D on the Y axis to show the gains from offshoring for country C in the above case. In the graph, identify the amount of R&D exports and component imports. (c) How will the gain from offshoring change if country C offshores its component production to the other foreign country? (d) Please discuss some other effects of offshoring that are not reflected in the graph.
Q2. Suppose the wage ratio of skilled labor v.s. unskilled labor, wH/wL, is highest in country A, intermediate in country B, and lowest in country C, and country C's production involves two stages/tasks, the skilled-labor intensive R&D and the unskilled-labor intensive components.
(a) To which country should country C offshore its component production so that country C's output is maximized?
(b) Use a
(c) How will the gain from offshoring change if country C offshores its component production to the other foreign country?
(d) Please discuss some other effects of offshoring that are not reflected in the graph.
Your answer:
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 1 images
