MACROECONOMICS W/CONNECT
18th Edition
ISBN: 9781307253092
Author: McConnell
Publisher: Mcgraw-Hill/Create
expand_more
expand_more
format_list_bulleted
Question
Chapter 20, Problem 9DQ
To determine
The reason as to why all the manufacturing is not done in low wage countries.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Recently, computer programmers in developing countries such as India have begun doing
work formerly done in the United States. This shift has undoubtedly led to substantial
pay cuts for some programmers in the United States. Answer the following two questions:
How is this possible, when the wages of skilled labor are rising in the United States as
a whole? What argument would trade economists make against seeing these wage cuts
as a reason to block outsourcing of computer programming?
The nation of Ectenia has 40 competitive apple orchards, which sell apples at the world price of $2 per apple. The following equations describe the
production function and the marginal product of labor in each orchard:
120L – L2
MPL
120 - 2L
where Q is the number of apples produced in a day, Lis the number of workers, and MPL is the marginal product of labor.
Suppose the world price of apples doubles to $4 per apple.
What is each orchard's labor demand as a function of the daily wage W?
OL= 120 – 2W
OL= 2,400 – 5W
OL= 60 – 0.25W
OL= 60 – 0.125W
What is the market's labor demand?
OL= 60 – 0.125W
OL= 120 – 10W
OL= 2,400 – 5W
OL= 2,400 – 10W
Ectenia has 200 workers who supply their labor inelastically.
The equilibrium wage is S
per worker per day. Each orchard hires
workers and makes a profit of S
per day. (Note: Assume
that wages are the firm's only costs.)
Suppose country A and B have a labour force of 1 and produce hops and barley using only labour. Country A's unit labour cost are 0.5 for hops and 0.5 for barley, country B's 0.2 for hops and 0.4 for barley. Suppose that both are needed to brew beer in equal quantitiy, so that both national and international demand has the property that equal amounts of barley and hops are demanded. How much more beer (as a percentage) will be brewed under international trade than in autarky?
Please enter the percentage rounded to a whole number (up or down is both acceptable) without the percentage sign.
Chapter 20 Solutions
MACROECONOMICS W/CONNECT
Ch. 20.2 - Prob. 1QQCh. 20.2 - Prob. 2QQCh. 20.2 - Prob. 3QQCh. 20.2 - Prob. 4QQCh. 20 - Prob. 1DQCh. 20 - Prob. 2DQCh. 20 - Prob. 3DQCh. 20 - Prob. 4DQCh. 20 - Prob. 5DQCh. 20 - Prob. 6DQ
Ch. 20 - Prob. 7DQCh. 20 - Prob. 8DQCh. 20 - Prob. 9DQCh. 20 - Prob. 10DQCh. 20 - Prob. 11DQCh. 20 - Prob. 12DQCh. 20 - Prob. 13DQCh. 20 - Prob. 14DQCh. 20 - Prob. 1RQCh. 20 - Prob. 2RQCh. 20 - Prob. 3RQCh. 20 - Prob. 4RQCh. 20 - Prob. 5RQCh. 20 - Prob. 6RQCh. 20 - Prob. 7RQCh. 20 - Prob. 8RQCh. 20 - Prob. 9RQCh. 20 - Prob. 10RQCh. 20 - Prob. 11RQCh. 20 - Prob. 12RQCh. 20 - Prob. 13RQCh. 20 - Prob. 1PCh. 20 - Prob. 2PCh. 20 - Prob. 3PCh. 20 - Prob. 4P
Knowledge Booster
Similar questions
- Brazil Mexico Soya per unit of labor 0.05 0.02 Corn per unit of labor 1.25 1.40 At what relative “price” of soya to corn would Mexico receive all of the potential gains from trade with Brazil? If production in both countries occur under conditions of perfect competition, and if the wage rate is $2 per hour in Brazil and $5 per hour in Mexico, using your knowledge of microeconomic theory, how would you go about calculating the price of corn in both countries?arrow_forwardFrance and Tunisia both have Mediterranean climates that are excellent for producing/harvesting green beans and tomatoes. In France it takes two hours for each worker to harvest green beans and two hours to harvest a tomato. Tunisian workers need only one hour to harvest the tomatoes but four hours to harvest green beans. Assume there are only two workers, one in each country, and each works 40 hours a week.arrow_forwardAt the start of this unit, we discussed the decision by many clothing companies to outsource production to Bangladesh and other low-wage economies. Show your results in a single diagram. 1. Draw the best response curve of the workers in the high-wage home country in the absence of outsourcing (with the wage on the horizontal axis, and effort on the vertical axis). 2. In the same diagram show the best response curve of workers in the foreign low-wage country in the absence of outsourcing. (Assume that wages are measured in dollars in both cases.) 3. Show in your diagram what the home country employer will pay home country workers if outsourcing is not possible. 4. Show in your diagram what the home country employer will pay workers in the low- wage country if it switches production there (ignore the costs of moving production). 5. Now assume that outsourcing is possible and is widely practiced by many firms in the clothing industry. Show the best response function for home country…arrow_forward
- A firm can use three different production technologies, with capital and labour requirements at each level of output as follows: Technology 1 Technology 2 Technology 3 Daily Output K L K L K L 100 3 7 4 5 5 4 150 3 10 4 7 5 5 200 4 11 5 8 6 6 250 5 13 6 10 7 8 a. 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? Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day but labour cost is only $40 per unit per day. For each level of output, which technology is the cheapest? Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change?arrow_forwardA firm is considering moving from the United States to Mexico. The firm pays its U.S. workers $15.00 per hour. Currently, U.S. workers have a marginal product of 30 units, whereas Mexican workers have a marginal product of 6 units. In order for the firm to reduce its wage cost per unit of output by moving to Mexico, the wages in Mexico must be below $___ per hour.arrow_forwardRecentily, Swedish companies have outsourcad manufacturing labor previously performad by Swedish workers at $22 per hour to U.S. workers who receive a wage rate of $11 per hour. All of the following will be the effacts of Swedish manufacturing-labor outsourcing except OA U.S. wages will increase. OB. Swedish wages and employment will tal. OC. Swedish wages will rise and employment will fal. OD. U.S. employment will increase.arrow_forward
- A firm can use three different production technologies, with capital and labor requirements at each level of output as follows: Technology 1 Technology 2 Technology 3 Daily Output 100 150 200 250 K 6 6 7 8 L 10 13 14 16 K 7 789 L 8 10 11 13 K 8 8 9 10 L 7 8 9 11 Suppose the firm is operating in a high-wage country, where capital cost is $110 per unit per day and labor cost is $90 per worker per day. For each level of output, which technology is cheapest? At 100 units of output, is the least expensive.arrow_forwardWhich of the following are common characteristics of multinational enterprises (MNEs)? Check all that apply. Low labor productivity ✔Acquisitions in nonrelated markets ✔ Creation of the demonstration effect ✔ Foreign sales that represent a high proportion of total sales Company headquarters that are always located in the country where production occurs ✔Diversified operations Complete the following table by indicating whether each assumption is used by multinational enterprise (MNE) analysis, conventional trade theory, or both. Check all that apply. Assumption Factor inputs move freely among nations. Goods are exchanged at competitive prices. Resources are transferred from lower to higher productive uses. MNE Analysis Conventional Trade Theoryarrow_forwardThe logic of service outsourcing - The Ricardian model It is sometimes argued in editorials or TV commentaries that the modern wave of outsourcing, especially outsourcing of services to Pakistan, 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 Pakistan. 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 Pakistan, and indicate the good in which each country has a comparative advantage. Production per Employee Production per Employee Computer Components Call Center Services Country (Units per hour) (Phone calls per hour) Comparative Advantage Canada 18 9 _____ (Call Center Services / Computer Components Production)…arrow_forward
- Ana and Beverly, produce the same product on identical machines. Ana receives $25 per hour and produces 100 units per hour. Beverly is able to produce 140 units per hour. The machine rate or cost of operation used by them is $100 per hour. The cost per piece of Ana's product is $ ___________ per piece. The hourly wage of Beverly in order that her cost per piece will equal that of Ana is $ ________ per hour.arrow_forwardIn the US, 30 thousand people are employed in whiskey production and 200 thousand people in motorcycle production, which is capital intensive. After opening up to trade, in the long run US economy-wide relative demand for labor O converges to the relative labor demand curve of the whiskey production industry O converges to the relative labor demand curve of the motorcycle production industry remains where it was O may follow any of the other three optionsarrow_forwardSuppose that a car dealership wishes to see if efficiency wages will help improve its salespeople’s productivity. Currently, each salesperson sells an average of one car per day while being paid $20 per hour for an eight-hour day.a. Suppose that if the wage is raised a second time to $40 per hour, the number of cars sold rises to an average of 2.5 per day. What is now the labor cost per car sold? $______ per vehicleb. If the firm’s goal is to maximize the efficiency of its labor expenditures, which of the three hourly salary rates should it use: $20 per hour, $30 per hour, or $40 per hour? $______ per hourc. By contrast, which salary maximizes the productivity of the car dealer’s workers (cars sold per worker per day)? $_______ per hourarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506893Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Microeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning