You have been appointed as Global Manager of a firm that has two plants, one in the United States and one in Mexico. Assume, you cannot change the size of the plants or the amount of capital equipment. The wage in Mexico is $5. The wage in the U.S. 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 U.S. is 500.
Is the firm maximizing output relative to its labor cost? Yes or No. Show how you know. If it is not, what should the firm do?© BrainMass Inc. brainmass.com June 4, 2020, 1:11 am ad1c9bdddf
a.Is the firm maximizing output relative to its labor cost? Show how you know.
For least cost input combination, the ratio of Marginal Product to wage rate of labor for two countries should be ...
Solution describes the steps to determine if the firm is maximizing output relative to its labor cost.