Question

If the hourly wage of German workers is $6, the hourly wage of Canadian workers is $10, and German workers produce half as much the output per hours as Canadian workers, all else equal, it would be efficient to locate production facilities in: a. Germany since the cost per unit of output will be higher.b. Germany since the cost per unit of output will be lower. c. Canada since the cost per unit of output will be higher. d. Canada since the cost per unit of output will be lower.

Answer 1

Answer:

D) Canada since the cost per unit of output will be lower.

Explanation:

A German worker earns $6 per hour with a X productivity, we can assume X = 10 units, so the labor cost in Germany = $6 / 10 units = $0.60 per unit

A Canadian worker earns $10 per hour with a 2X productivity, we can assume X = 10 units, so the labor cost in Canada = $10 / 20 units = $0.50 per unit

Canadian direct labor is 20% more efficient than German labor.