An American company that sells consumer electronics products has manufacturing facilities in Mexico, Taiwan, and Canada

Chapter 6 Problem 5

Question 5: 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
  1. Given these figures, is the firm currently allocating its production resources optimally? If not, what should it do? (Consider output per person as a proxy for marginal product.)
  2. Suppose the firm wants to consolidate all its manufacturing into one facility. Where should it locate? Explain.

Course: Managerial Economics

  • 20/05/2018
  • 10
Categories: Questions

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