Question 4. Consider an offshoring model where the labor usage of four activities in the U.S. and Mexico are as follows: Assembly Component Office R&D Production Services Unskilled labor Mex: 10 Mex: 6 Mex: 4 Mex: 2 U.S.: 5 U.S.: 3 U.S.: 2 U.S.: 1 Skilled labor Mex: 2 Mex: 2 Mex: 4 Mex: 20 U.S.: 1 U.S.:1 U.S.: 2 U.S.: 10 Skilled/Unskilled 1/5 1/3 1 10 Ratio Suppose that the wages of unskilled and skilled workers in the U.S. are 1 and 2, respectively. In Mexico, suppose that the wages of unskilled and skilled workers are 1/4 and 1.5, respectively. Compute the costs of production of each activity in each country. Make a table (a) like the one below and fill it with numbers. Mexico U.S. (b) Assembly Component Production Office R&D Services Which activities are going to be performed in the U.S. and which activities are going to be performed in Mexico?
Question 4. Consider an offshoring model where the labor usage of four activities in the U.S. and Mexico are as follows: Assembly Component Office R&D Production Services Unskilled labor Mex: 10 Mex: 6 Mex: 4 Mex: 2 U.S.: 5 U.S.: 3 U.S.: 2 U.S.: 1 Skilled labor Mex: 2 Mex: 2 Mex: 4 Mex: 20 U.S.: 1 U.S.:1 U.S.: 2 U.S.: 10 Skilled/Unskilled 1/5 1/3 1 10 Ratio Suppose that the wages of unskilled and skilled workers in the U.S. are 1 and 2, respectively. In Mexico, suppose that the wages of unskilled and skilled workers are 1/4 and 1.5, respectively. Compute the costs of production of each activity in each country. Make a table (a) like the one below and fill it with numbers. Mexico U.S. (b) Assembly Component Production Office R&D Services Which activities are going to be performed in the U.S. and which activities are going to be performed in Mexico?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 4.
Consider an offshoring model where the labor usage of four activities in
the U.S. and Mexico are as follows:
Assembly
Component
Office
R&D
Production
Services
Unskilled labor
Mex: 10
Mex: 6
Mex: 4
Mex: 2
U.S.: 5
U.S.: 3
U.S.: 2
U.S.: 1
Skilled labor
Mex: 2
Mex: 2
Mex: 4
Mex: 20
U.S.: 1
U.S.:1
U.S.: 2
U.S.: 10
Skilled/Unskilled
1/5
1/3
1
10
Ratio
Suppose that the wages of unskilled and skilled workers in the U.S. are 1 and 2, respectively. In
Mexico, suppose that the wages of unskilled and skilled workers are 1/4 and 1.5, respectively.
Compute the costs of production of each activity in each country. Make a table
(a)
like the one below and fill it with numbers.
Mexico
U.S.
(b)
Assembly
Component
Production
Office
R&D
Services
Which activities are going to be performed in the U.S. and which activities are
going to be performed in Mexico?
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