Question

Juan works at Texas Burgers in El Paso and earns $8.00 per hour. His twin brother Felipe works in Mexico Burgers in Ciudad Juarez just across the border and earns $3.00 per hour for exactly the same work. An economist looking at this situation sees:

A.an incentive for Felipe to cross the border to get a job and thus reduce the gap.
B. an incentive for Felipe to quit and find another job in Mexico.
C. the tendency of the rich to get richer and the poor to get poorer, widening the gap.
D. evidence that the law of one price has no support in the real world.

Answer 1

Answer:

A.an incentive for Felipe to cross the border to get a job and thus reduce the gap.

Explanation:

Economists are concerned with the efficient use of resources to achieve maximum benefits. Economics is about making choices that add the greatest value to society. An economist will consider the opportunity cost associated with an option before making a decision.

The wage rate in Texas, where Juan works is much higher compared to what Felipe earns. Felipe can gain more by offering his labor service in Texas, which is just across the border. Economists will consider the earnings per hour, and judge than Felipe will be better off working in Texas compared to Mexico.