Question

Transportation Costs -

(A) Why is it easy to explain the massive relocation of U.S. jobs in areas like call centers to countries like India, Mexico, and Costa Rica over the past twenty years? (SHOW FORMULA USED TO SOLVE PROBLEM)

(B) Costa Rican schools teach English and Spanish to all students. But very few people ever leave Costa Rica to live in the U.S. Why is Costa Rica so focused on having a bilingual workforce? (SHOW FORMULA USED TO SOLVE PROBLEM)

Transportation Costs and Potential Foreign Markets -

(C) You are going to move your seasonal candy production facility from Chicago because of high labor costs. Your primary products are Easter and Christmas candies. You have narrowed your choice of new locations to either Costa Rica or Pakistan. Focusing on transportation costs and potential future markets, which would be the better location? (SHOW FORMULA USED TO SOLVE PROBLEM)

Exchange Rates -

(D) The dollar/euro exchange rate is currently $1.30 per euro. Ten years ago, that exchange rate was $1.00 per euro. Over the past decade, has the dollar apreciated or depreciated relative to the euro? (SHOW FORMULA USED TO SOLVE PROBLEM)

Answer 1

(A) Why is it easy to explain the massive relocation of U.S. jobs in areas like call centers to countries like India, Mexico, and Costa Rica over the past twenty years?

The relocation of U.S jobs in areas like call centers is due to companies wanting its skilled employees to get into other efficient processes. That is call centers are back-end jobs and don't require high skills, Now many U.S. Companies want to cut their operating costs as well. Now if we can observe the trend an average salary in the U.S is around $3500/month, In developing countries like India the same job gets to be done in $200/month - $500/month, this is called Labour arbitrage. That is the same job is being done for much lesser employee salary, therefore, costs cut down and revenues for U.S companies increase.

Costa Rican schools teach English and Spanish to all students. But very few people ever leave Costa Rica to live in the U.S. Why is Costa Rica so focused on having a bilingual workforce?

Costa Rica is in the middle of Columbia, Panama, and Mexico and Guatemala respectively, therefore teaching Spanish and English in schools give the students a better geographic exposure to relocate elsewhere. Now as immigration is concerned as Costa Rica is much closer to Panama and Columbia they prefer to relocate to the spanish speaking nations than to the US.

(C) You are going to move your seasonal candy production facility from Chicago because of high labor costs. Your primary products are Easter and Christmas candies. You have narrowed your choice of new locations to either Costa Rica or Pakistan. Focusing on transportation costs and potential future markets, which would be the better location?

As the company is manufacturing Christmas candy, a plant can be set up in Costa Rica rather than in Pakistan as transportation costs are much lesser to transport candy from Costa Rica to the USA, than to transport the same from Pakistan. There is also no Political stability in Pakistan and market expansion is fewer if the company ever want to in developing markets as Pakistan has Muslims as majority religion, China is of Buddhism and India is of Hinduism. In Costa Rica, they can expand into Columbia or Spain or any other North American country if they ever want to.

The dollar/euro exchange rate is currently $1.30 per euro. Ten years ago, that exchange rate was $1.00 per euro. Over the past decade, has the dollar appreciated or depreciated relative to the euro?

The dollar value has been depreciated relative to Euro.