Size of the plants or the amount of capital equipment

Reference no: EM13685959

A firm has two plants, one in Mexico and one in the United States and it cannot change the size of the plants or the amount of capital equipment. The wage in Mexico is $5. The wage in the U.S. is $20. Given current employment, the marginal product of the last worker in Mexico is 100, and the marginal product of the last worker in the U.S. is 500.

1) If it is not, what should the firm do?

2) Is the firm maximizing output relative to its labor cost? Show how you know.

Reference no: EM13685959

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