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

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

Quizplus · Accepted Answer

The output per $1 of cost in Mexico is calculated by dividing the MPP of the Mexican worker by their hourly wage: 5 units / $4 = 1.25 units of good Y per $1.

Situation 26-2 a Company Is Trying to Decide Whether It