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Ch 7 #1-3 - Jeff Phang 992268154 Ch 7#1-3 1 Costs a Mexico...

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Jeff Phang 992268154 Ch 7 #1-3 1. Costs a) Assembly Component Production Office Service R&D Mexico $ . 40 00 $ . 32 00 $ . 48 00 $ . 204 00 United States $ . 75 00 $ . 55 00 $ . 70 00 $ . 260 00 Import cost: % 25 $ . 50 00 $ . 40 00 $ . 60 00 $ . 255 00 Import cost: % 30 $ . 52 00 $ . 41 60 $ . 62 40 $ . 265 20 Import cost: % 50 $ . 60 00 $ . 48 00 $ . 72 00 $ . 306 00 b) With trade costs at +50%, the value chain is sliced between Component Production and Office Services. This is, it is cheaper to outsource assembly and component production while keeping Office Services and Research and Development in the US. Office Services and R&D would cost more if produced in Mexico. c) With trade costs at +30%, the value chain is sliced between Office Services and R&D. This means it is cheaper to outsource assembly and component production and Office Services to Mexico while retaining Research and Development in the US. d) With trade costs at +25%, it is cheaper to have all factors of production outsourced to Mexico because even R&D is cheaper at $255 in Mexico, compared with $260 in the US 2.
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