Purchase Solution

Wage Difference Between Mexico and the United States

Not what you're looking for?

Ask Custom Question

Ross Perot added his memorable "insight" to the debate over the North American Free Trade Agreement (NAFTA) when he warned that passage of NAFTA would create a "giant sucking sound" as U. S. employers shipped jobs to Mexico, where wages are lower than wages in the United States. As it turned out, many U. S. firms chose not to produce in Mexico despite the much lower wages there. Explain why it may not be economically efficient to move production to foreign countries, even ones with substantially lower wages.

Purchase this Solution
Solution Summary

Ross Perot famously claimed that the North American Free Trade Agreement (NAFTA) would create a "giant sucking sound" as U. S. employers shipped jobs to Mexico. This solution uses economic analysis to explain why Perot's "sucking sound" did not in fact occur.

Solution Preview

Ross Perot didn't consider the difference in productivity between American and Mexican workers. The US has a much larger supply of capital than Mexico, meaning that American workers are more highly trained and have better ...

Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Production and Firm Maximizing Output

    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.

  • It is argued that if a rich high wage country such as the USA

    288285 Rich High Wage Country Expanded Trade with Lower Wage Country It is argued that if a rich high wage country such as the United States were to expand trade with a relatively lower wage country such as Mexico, the U.S. industry would migrate south

  • Optimal output level

    383490 Optimal output level: Example problem 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.

  • Optimal output level

    384194 Managerial Economics 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.

  • Maximizing output relative to its labor cost

    339631 International Trade You have been appointed 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.

  • Maximizing output relative to its labor cost

    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 amount of capital equipment. The wage in Mexico is $5. The wage in the U.S. is $20.

  • Developed vs. Developing Country

    The GDP growth rate of United States is 2.4%, and Mexico is 0.8%, the Unemployment rate of US is 4.9% and Mexico is 6.5%, the hourly wage rate in the United States is $16.71 (median) and Mexico is between $2.5 and $3.

  • profit maximization

    3) 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 amount of capital equipment. The wage in Mexico is $5. The wage in the U.S. is $20.

  • International Business: Wages,Terminations, Bribes

    In the United States, the Fair Labor Standards Act (FLSA) establishes the minimum wage, among other items, for full and part time workers in the United States.

View More Related Solutions