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Chapter 28: Q.20 (page 647)

Take a look at the two panels of Figure 28-5. Explain why at the points labeled E1, U.S. firms might have an incentive to outsource labor services abroad. In addition, explain why the shifts in the demand curves to the positions denoted D2 occur in each panel.

Short Answer

Expert verified

Since the wage rate of labourers in India is lower than the wage rate of labourers in the U.S, the firm will begin re-appropriating creation to Indian specialists.

Step by step solution

01

Given Information

This work moving to India will prompt a fall popular for laborers in the U.S. This will prompt a leftward shift in the interest for work in the U.S from D1 to D2, which thus will cause a decrease in the wage rate from$19to $16and work of these laborers in the U.S will tumble from Q1 to Q2.

02

Explanation

Then again, the interest for laborers in India will increment when U.S firms re-appropriate work to India. The interest bend for laborers in India will move to one side from D1 to D2 prompting an ascent in the wage rate from$8to$13and work of laborers in India will increment from Q1 to Q2.

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Most popular questions from this chapter

Recently, Swedish companies have outsourced manufacturing labor previously performed by Swedish workers at \(20 per hour to U.S. workers who receive a wage rate of \)10 per hour. Evaluate the effects of Swedish manufacturing-labor outsourcing on Swedish and U.S. employment levels and wages.

Other things being equal, how would a firm adjust if the market clearing wage rate for older workers decreases relative to the market clearing wage rate for younger workers? Explain briefly.

The following table depicts the output of a firm that manufactures computer printers. The printers sell for $100each.

Labor Input
(workers per week)		 Total Output
(printers per week)
10 200
11 218
12 234
13 248
14 260
15 270
16 278

Calculate the marginal product and marginal revenue product at each input level above 10 units.

Suppose that until recently, U.S. firms that produce digital apps had been utilizing only the labor of qualified U.S. workers at a wage rate of \(35 per hour. Now, however, these firms have begun engaging in labor outsourcing to Russia, where qualified workers are available at a dollar wage rate of \)15 per hour. Evaluate the effects of this new U.S. app-labor outsourcing initiative on U.S. and Russian employment levels and wages.

28-8. A firm hires labor in a perfectly competitive labor market. Its current profit-maximizing hourly output is 100units, which the firm sells at a price of \(5per unit. The marginal produce of the last unit of labor employed is 5units per hour. The firm pays each worker an hourly wage of \)15.

a. What marginal revenue does the firm earn, from the sale of the output produced by the last worker employed?

b. Does this firm sell its output in a perfectly competitive market?
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