It is sometimes argued in editorials or TV commentaries that the modern wave of outsourcing, especially outsourcing of services to India, defies the logic of the Ricardian model. Let's examine if this is actually the case. The following table presents information on labor productivity in computer component production and call center services in Canada and India. Assume that Canada has an absolute advantage in both. To complete the following table, choose the number of calls that would be most plausible and consistent with the reality of outsourcing services to India, and indicate the good in which each country has a comparative advantage. Production per Employee Computer Components Call Center Services Country (Units per hour) (Phone calls per hour) Comparative Advantage Canada 18 India 3 Call center services Does the observed pattern of outsourcing from Canada to India, where Computer component production , support ne Togie or the Ricararan model? O Yes No

It is sometimes argued in editorials or TV commentaries that the modern wave of outsourcing, especially outsourcing of services to India, defies the logic of the Ricardian model. Let's examine if this is actually the case. The following table presents information on labor productivity in computer component production and call center services in Canada and India. Assume that Canada has an absolute advantage in both. To complete the following table, choose the number of calls that would be most plausible and consistent with the reality of outsourcing services to India, and indicate the good in which each country has a comparative advantage. Production per Employee Computer Components Call Center Services Country (Units per hour) (Phone calls per hour) Comparative Advantage Canada 18 India 3 Call center services Does the observed pattern of outsourcing from Canada to India, where Computer component production , support ne Togie or the Ricararan model? O Yes No

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 8PA

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Zagreb International Review of Economics & Business, Vol. 10, No. 1, pp. 33-66, 2007Â© 2007 Economics Faculty ZagrebAll rights reserved. Printed in CroatiaISSN 1331-5609; UDC: 33+65Outsourcing to China: Opportunities, Threats, and StrategicFitIlan Alon*Theodore T. Herbert**J. Mark Munoz***Abstract: China is a prominent outsourcing destination in Asia. International labour outsourcing,specially in the IT sector, has grown rapidly in recent years. This article defines outsourcingthrough an extensive review of the literature and discusses the opportunities and challengesfor outsourcing to China. Seeking strategic â€˜fitâ€™ among the disparate elements that influencethe firmâ€™s outsourcing decision is recommended. The authors explore the IT and businesslandscapes in China and propose strategies for outsourcing success there.Keywords: labour outsourcing, China, information technology, international business,…
A firm can use three different production technologies, with capital and labour requirements at each level of output as follows:Daily OutputTechnology 1 Technology 2 Technology 3K L K L K L100 3 7 4 5 5 4150 3 10 4 7 5 5200 4 11 5 8 6 6250 5 13 6 10 7 8a) Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labour cost is $80 per worker per day. For each level of output, which technology is the cheapest?b) Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day and labour cost is $40 per worker per day. For each level of output, which technology is the cheapest?c) Suppose the firm moves from a high-wage to a low-wage country but that its level of output remains constant at 200 units per day. How will its total employment change?
15. Assuming Portugal has 180 man-hours (mhrs) of labor resource available for production, and labor is the only resource, the per unit resource cost of cloth in Portugal is ____ mhrs/yard. (Please do NOT reduce fractions to decimals.)
Case C: Galaxy Multinational. Galaxy, a multinational corporation, has two plants, one in the United States and the other in Mexico, and it cannot change the size of the plants or the amount of capital equipment in the short run. The wage in Mexico is equivalent to US $5 per hour. The wage in the U.S. is $25 per hour. Given current employment situation, the productivity per worker in Mexico is 200 units per hour, and the productivity per worker in the U.S. is 400 units per hour. Is Galaxy maximizing output relative to its labor cost? If not, what should Galaxy do? Justify your answer.
14.Assuming Portugal has 180 man-hours (mhrs) of labor resource available for production, and labor is the only resource, the per unit resource cost of wine in Portugal is ____ mhrs/bottle. (Please do NOT reduce fractions to decimals.)
Galaxy, a multinational corporation, has two plants, one in the United States and the other inMexico, and it cannot change the size of the plants or the amount of capital equipment in theshort run. The wage in Mexico is equivalent to US $5 per hour. The wage in the U.S. is $25 perhour. Given current employment situation, the productivity per worker in Mexico is 200 units perhour, and the productivity per worker in the U.S. is 400 units per hour.Is Galaxy maximizing output relative to its labor cost? If not, what should Galaxy do
17. Assuming Portugal has 180 man-hours (mhrs) of labor resource available for production, and labor is the only resource, the per unit opportunity cost of cloth in Portugal is ____ bottles/yard. (Please do NOT reduce fractions to decimals.)
Most firms in the apparel and footwear industries choose to outsource production to countries where labor is abundant (primarily, Southeast Asia and the Caribbean)long dash—but those firms do not integrate with their suppliers there. On the other hand, firms in many capital-intensive industries choose to integrate with their suppliers. What could be some differences between the labor-intensive apparel and footwear industries on the one hand and capital-intensive industries on the other hand that would explain these choices? A multinational may prefer to
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16 Calculate the implied growth rate of technology in each scenario. Assume labor's share of output is 60% and capital's share of output is 40%. Instructions: Enter numbers rounded to two decimal place in each box. Growth Rate of Labor (8) Growth Rate of Capital (8) Scenario A B C D Growth Rate of Output (8) 3.0 4.2 3.0 4.2 2 3 2 1 2 3 1 4 Implied Growth Rate of Technology (8)
Figure 2 represents the Texas labor market. In this simplified model, labor and capital are the only factors of production. The initial supply of labor is denoted by S0 and consists entirely of U.S. workers. The demand for labor is denoted by D. Quantity of workers are in thousands and the wage rate is for a 40-hour workweek. (a) At labor market equilibrium, what is total weekly labor income? (b) At labor market equilibrium, what is the weekly income earned by U.S. capital owners? (Note: the capital owners are on the demand side – the demand curve reflects their demand for labor -- so the consumer surplus is the capital owner’s income.) Mexican labor migration yields a new labor supply curve, S1, which is the combination of domestic labor supply and Mexican labor. Given this: (c) What is total weekly labor income?(d) What is the weekly income earned by U.S. capital owners?