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Is the firm maximizing output relative to its labor cost

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Reference no: EM132219822

Petram Company has two plants, one in the United States and one in Vietnam, and it cannot change the size of the plants or the amount of capital equipment. The hourly wage in Vietnam is $5, while the hourly wage in the United States is $20. Given current employment, the marginal product of the last worker in Vietnam is 100, and the marginal product of the last worker in the United States is 500. Based on this information, answer the following questions.

  1. Is the firm maximizing output relative to its labor cost? Explain how you know.
  2. If it is not, what should the firm do?

Reference no: EM132219822

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