Economics 13th Edition by James Gwartney, Richard Stroup, Russell Sobel, David Macpherson

Exercise 7

A firm is considering moving from the United States to Mexico. The firm pays its U.S. workers $12 per hour. Current U.S. workers have a marginal product of forty, whereas the Mexican workers have a marginal product of ten. How low would the Mexican wage have to be for the firm to reduce its wage cost per unit of output by moving to Mexico?