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An American Company that sells consumer electronics products has manufacturing facilities in Mexico, Taiwan, and Canada. The average hourly wage, output, and annual overhead cost for each site are as follows: Mexico Taiwan Canada Hourly wage rate $1.50 $3.00 $6.00 Output per person 10 18 20 Fixed overhead cost $150,000 $90,000 $110,000
a. Given these figures, is the firm currently allocating its production resources optimally?
b. If not, what should it do? (Consider output per person as a proxy for marginal product). Suppose the firm wants to consolidate all its manufacturing into one facility. Where should it locate?
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Now assume that these outputs comprise all of GDP. Keeping 1992 as the base year, Elucidate the GDP deflator for 1993.
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.
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When manufacturer decrease price for goods and services, it increase customer’s surplus and everyone standard of living. Therefore, it behooves government to impose below market value ceiling on customers goods,
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