1. A firm has two plants, one in the United States and one in Mexico, and it cannot change the size of the plants or the current amount of capital equipment. The wage in Mexico is $5. The wage in the United States is $20. Given current employment, the marginal product of the last worker in Mexico is 100, and the marginal product of the last worker in the United States is 500.
a. Is the firm maximizing output relative to its cost? Show how do you know.
b. If it is not, what should the firm do?
Recently Asked Questions
- Considering your personal research interest, which of the methods described in this course do you believe will be most useful to your research? Why? This
- What are the institutional and sociological instruments (ways) to control competing interests to maximize the common good?
- Name a product that you regularly purchase from a firm that operates in an oligopolistic industry. Explain why the product and firm fit the model of oligopoly.