(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours per unit of output) needed in each of four activities to produce the final product. Suppose that wages of unskilled and skilled workers are $10 and $20 in the United States and $1 and $5 in India. Further suppose that trade costs equal 25% of wage costs in India. Now where is the value chain sliced? Which operations will the United States offshore to India?
A) assembly operations only
B) assembly operations and component production
C) assembly operations, component production, and office services
D) assembly operations, component production, office services, and R&D

Question

(Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours per unit of output) needed in each of four activities to produce the final product. Suppose that wages of unskilled and skilled workers are $10 and $20 in the United States and $1 and $5 in India. Further suppose that trade costs equal 25% of wage costs in India. Now where is the value chain sliced? Which operations will the United States offshore to India? 
A) assembly operations only 
B) assembly operations and component production 
C) assembly operations, component production, and office services 
D) assembly operations, component production, office services, and R&D

Quizplus · Accepted Answer

The Answer of (Table: Labor Requirements) The table gives U.S. and Indian labor requirements (hours per unit of output) needed in each of four activities to produce the final product. Suppose that wages of unskilled and skilled workers are $10 and $20 in the United States and $1 and $5 in India. Further suppose that trade costs equal 25% of wage costs in India. Now where is the value chain sliced? Which operations will the United States offshore to India? 
A) assembly operations only 
B) assembly operations and component production 
C) assembly operations, component production, and office services 
D) assembly operations, component production, office services, and R&D

(Table: Labor Requirements) the Table Gives U