Situation 26-2
A company is trying to decide whether it should produce good Y in the U.S. or in Mexico. Suppose a U.S. worker earns $12 per hour and a worker in Mexico earns $4 per hour. Also suppose that the marginal physical product (MPP) of the U.S. worker is 10 units of good Y and the MPP of the Mexican worker is 5 units of good Y.
-Refer to Situation 26-2. The output produced per $1 of cost in the Mexico. is

Question

Quizplus · Accepted Answer

In Mexico, a worker earns $4 per hour and produces 5 units of good Y, so for each dollar spent, the output is $ \frac{5 \text{ units}}{4 \text{ dollars}} = 1.25 $ units of good Y per dollar.

Situation 26-2 A Company Is Trying to Decide Whether It Should Produce