Inputs in shenzen compare to angola

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The firm is considering a movement of the plant to Shenzen, China where labour is cheaper. The same mathematical relationship between inputs and outputs will hold. A new plant in Shenzen would enjoy a one hour expense for labour of $40. Because of a scarcity of modern equipment, the expense of one machine hour would jump to $320. Can the move to China be financially justified? Theoretically, how will the mix of inputs in Shenzen compare to the mix of inputs in Angola?

For political reasons, the plant is not moved to China. You receive news that certain machinery is unavailable for the foreseeable future. Due to unscheduled changeover work, use of machinery is constrained to 1500 hours each shift. This news comes at a bad time. The COO tells you that market demand for output has dramatically grown. The equilibrium price for a widget has risen to $160.

Reference no: EM1315459

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