Situation 26-2 a Company Is Trying to Decide Whether It

question 78

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. If good Y is produced in the United States, the output per $1 of cost would be ___________________ than if good Y were produced in Mexico, thus it would be best to produce good Y in ____________________.

• A)higher; Mexico.
• B)lower; Mexico.
• C)higher; the United States.
• D)lower; the United States.

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