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In: Economics

Suppose the firm moves from a high-wage to a low-wage country but its level of output...

Suppose the firm moves from a high-wage to a low-wage country but its level of output

remains constant at 200 units per day. How will its total employment change?

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Expert Solution

Solution:

Moving from a high wage country to low wage country implies that labor has become relatively inexpensive. Further, we are given that the output level remains constant, so firms are still producing at same level, but wages have lowered which indicates that employment must have increased: producing same level of output is cheaper with labor and so capital and other resources will be employed less and production will tend more towards labor hiring. This higher hiring implies a higher employment.

Rahul Sunny answered 2 years ago
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