If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $2, and U.S. workers produce 9 times as much output per hour as Mexican workers, then, all else equal, it would be efficient to locate production facilities in:
A) the United States since the cost per unit of output will be higher.
B) the United States since the cost per unit of output will be lower.
C) Mexico since the cost per unit of output will be higher.
D) Mexico since the cost per unit of output will be lower.

Question

Quizplus · Accepted Answer

The cost per unit of output is lower in the United States because U.S. workers produce 9 times as much output per hour, making their effective cost per unit of output lower despite the higher hourly wage.

If the Hourly Wage of U