Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 25, Problem 2P
Sub part (a):
To determine
Cost per mug and labor cost per mug.
Sub part (b):
To determine
Wage difference per hour between the country.
Sub part (c):
To determine
Wage difference per unit between the country.
Sub part (d):
To determine
Relationship between higher labor cost per hour and higher labor cost per unit.
Sub part (e):
To determine
Migration of unskilled labor.
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a. Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labour cost is $80 per worker per day. For each level of output, which technology is the cheapest?
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Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change?
A firm can use three different production technologies, with capital and labor requirements at each level of output as follows:
Technology 1
Technology 2
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Daily
Output
100
150
200
250
K
6
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8
L
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Suppose the firm is operating in a high-wage country, where capital cost is $110 per unit per day and labor cost is $90 per worker per day.
For each level of output, which technology is cheapest?
At 100 units of output,
is the least expensive.
Recently, computer programmers in developing countries such as India have begun doing
work formerly done in the United States. This shift has undoubtedly led to substantial
pay cuts for some programmers in the United States. Answer the following two questions:
How is this possible, when the wages of skilled labor are rising in the United States as
a whole? What argument would trade economists make against seeing these wage cuts
as a reason to block outsourcing of computer programming?
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