Situation 26-2 A Company Is Trying to Decide Whether It Should Produce

question 52

Multiple Choice

Situation 26-2
A company is trying to decide whether it should produce good Y in the U.S. or in Mexico. Suppose a U.S. worker earns $12 per hour and a worker in Mexico earns $4 per hour. Also suppose that the marginal physical product (MPP) of the U.S. worker is 10 units of good Y and the MPP of the Mexican worker is 5 units of good Y.
-Refer to Situation 26-2. The output produced per $1 of cost in the U.S. is

• A)120 units of good Y.
• B)0.83 units of good Y.
• C)22 units of good Y.
• D)2 units of good Y.

---

Definitions:

Unredeemed Containers

Items such as bottles or cans that are not returned for a deposit, often creating recycling or waste management challenges.

Fee Increase

An adjustment that results in the rise of charges or fees for services or goods.

Social Discount Rate

The rate used to convert future costs and benefits to their present value in order to make decisions regarding public projects.

NPV Calculations

The process of determining the net present value of cash flows by discounting them to the present value using a specific rate.