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. If good X is produced in the U.S. the output per $1 of cost would be ___________________ than if good X were produced in Mexico, thus it would be best to produce good X in

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. If good X is produced in the U.S. the output per $1 of cost would be ___________________ than if good X were produced in Mexico, thus it would be best to produce good X in

Quizplus · Accepted Answer

The output per $1 of cost in the U.S. can be calculated as MPP divided by wage rate, which is 12 units of good X divided by $15 per hour, or 0.8 units of good X per dollar. In Mexico, the output per $1 of cost would be 3 units of good X divided by $4 per hour, or 0.75 units of good X per dollar. Thus, producing good X in the U.S. would result in higher output per $1 of cost, making it the best choice.

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