Situation 26-1 A company is trying to decide whether it should produce good X in the U.S. or in Mexico. Suppose a U.S. worker earns $15 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 12 units of good X and the MPP of the Mexican worker is 3 units of good X.
Refer to Situation 26-1. The output produced per $1 of cost in Mexico is

Question

Situation 26-1 A company is trying to decide whether it should produce good X in the U.S. or in Mexico.  Suppose a U.S. worker earns $15 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 12 units of good X and the MPP of the Mexican worker is 3 units of good X.
Refer to Situation 26-1. The output produced per $1 of cost in Mexico is

Quizplus · Accepted Answer

The output per $1 of cost in Mexico is calculated by dividing the MPP of the Mexican worker (3 units) by the wage rate ($4), resulting in 0.75 units of good X per $1.

Situation 26-1 a Company Is Trying to Decide Whether It