Operation Management help 03
Detailed Question: here is my economics (international trade homework below)
International Economics Chapter 7 Problem Set
1. Consider the following scenario. Wages for skilled and unskilled labor in the US are WS = $8 and WU = $4. In Mexico, wages are WS* = $6 and WU*=$1. Consider two production activities assembly and components manufacturing. Assembly employs 3 unskilled workers and 1 skilled worker per one unit of final product. Components manufacturing employs 3 skilled workers and 1 unskilled worker per unit of final product. Outsourcing costs are $10 per unit of final product for either stage of production.
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a. Which stage of production will the Home country outsource? Show your work!
b. Illustrate the gains from outsourcing using a diagram placing assembly on the x-axis.
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