Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 25, Problem 9CQ
To determine

Wage rate of Country M’s workers.

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A 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.
We often work with production technologies that give rise to initially increasing marginal product of labor that eventually decreases. Are the following statements then True or False? Explain.A negative marginal product of labor necessarily implies a downward sloping production frontier at that level of labor input.
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
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