Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 25, Problem 9CQ
To determine
Wage rate of Country M’s workers.
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A firm is considering moving from the United States to Mexico. The firm pays its U.S. workers $15.00 per hour. Currently, U.S. workers have a marginal product of 30 units, whereas Mexican workers have a marginal product of 6 units.
In order for the firm to reduce its wage cost per unit of output by moving to Mexico, the wages in Mexico must be below $___ per hour.
Explain who should handle the labor relation in concerned country. Is it the headquarters or subsidiary? Explain why?
Many US based companies rely on labor from low-wage countries. Identify a company that uses labor from low-wage countries and discuss at least one region they do business in.
Chapter 25 Solutions
Economics: Private and Public Choice
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- A firm can use three different production technologies, with capital and labour requirements at each level of output as follows: Technology 1 Technology 2 Technology 3 Daily Output K L K L K L 100 3 7 4 5 5 4 150 3 10 4 7 5 5 200 4 11 5 8 6 6 250 5 13 6 10 7 8 a. Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labour cost is $80 per worker per day. For each level of output, which technology is the cheapest? Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day but labour cost is only $40 per unit per day. For each level of output, which technology is the cheapest? Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change?arrow_forwardThe following chart shows the number of workers and hourly wage rate required to produce different quantities of braking systems in an hour. 15 9 13 15 2.89 4.00 4.70 6.43 7.27 Quantity of Output (Q) 2 Workers (L) Wage Rate Per Hour 15.28 15.28 15.28 15.28 15.28 Calculate the cost of producing nine braking systems in an hour. Round your answer to the nearest cent. Provide your answer below:arrow_forwardDistinguished labor standard from labor relations.arrow_forward
- For the first several questions, you will deal with Westburg, a nation with a per-worker production function y = f(k) = 5k¹/2 (5 times the square root of k). The marginal product of capital for this production function is 2.5k-¹/2 (2.5 times 1 divided by the square root of k, or 5 divided by (2 times the square root of k)). The economy starts with 400 units of capital per worker (see Table One); people in the economy consume 86% of each dollar of income they earn, and machinery depreciates at a steady rate to be totally used up/worthless in 50 years. There is no technology or population growth. Below is Table One; you'll fill in some, but not all, of the spaces marked by letters: Table One: Row 1 2 3 Question 1 k 400 f 1 y a g m C b h n i C i O Consider the information given about Westburg in Table One. Tell me the value for cell a, carefully following all numeric directions. Sk d j р ΔΚ e k qarrow_forwardSuppose that a firm's only variable input is labor. The firm increases the number of employees from four to five, thereby causing weekly output to rise by five units and total costs to increase from $2,700 per week to $3,000 per week. What is the marginal product of the fifth worker? units. (Your answer should be a whole number.) What is the weekly wage rate earned by the fifth worker? $ (Your answer should be rounded to the nearest dollar)arrow_forwardWidget factory Inc. in Wisconsin has the following production function: F(L,K)=2L L represents the number of labours hours. Workers at this factory are paid an hourly wage of $30 and they rent capital at$25/ hour.since this is a competitive market, the factory output is $50 per unit. Let's pretend the firm operates in the short run with capital fixed at 900, how many workers would widget factory Inc employ? What is their profit rate?arrow_forward
- Consider how an appreciation of the concept of opportunity cost may be of use in explaining why it might be worthwhile for a company to outsourcing work even though outsourcing may involve a higher monetary costarrow_forwardDolls are fabricated in a process with two resources. The first resource has a capacity of 1.5 dolls per hour. The capacity of the second resource is 0.99 dolls per hour. The first resource has 7 workers and the second resource has 9 workers. Demand for this process is 1.1 dolls per hour. Wages are $24 per hour. Instruction: Round your answer to two decimal places. What is the cost of direct labor (in $)? per unitarrow_forwardFollowing is information on the production levels of three different firms. Firm A is currentlyproducing at a quantity where it is experiencing increasing returns. Firm B is currentlyproducing at a quantity where it is experiencing diminishing returns. Firm C is currentlyproducing at a quantity where it is experiencing negative returns.a. If each of the firms cut back on its labor force, what will happen to its marginalproduct of labor? And why?b. If each of the firms adds to its labor force, what will happen to its marginal product oflabor? And why?arrow_forward
- Different between informal and formal Labour Costsarrow_forwarda) Graph the TP, MP and AP data below. Clearly identify the 3 stages of production by drawing dotted lines vertically at the appropriate labor levels (increasing returns, decreasing returns, negative returns). productarrow_forwardFrom the production data in the table below, calculate the VMP, for the 2nd unit of labor. Assume the wage rate is $80 and the price of the firm's output is $5. (Give the numeric value only for your response; do not include commas, dollar signs, etc.) Capital Labor Output (Q) 100 100 1 20 100 44 100 66 100 4 84 100 96 100 104 100 7 98 Numeric Responsearrow_forward
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