An American company that sells consumer electronics products has manufacturing facilities in Mexico, Taiwan, and Canada. The average hourly wage, output, and annual overhead cost for each site are as follows:

Mexico Taiwan Canada Hourly wage rate $1.50 $3.00 $6.00 Output per person 10 18 20 Fixed overhead cost $150,000 $90,000 $110,000

a. Given these figures, is the firm currently allocating its production resources optimally?

If not, what should it do? (Consider output per person as a proxy for marginal product.)

b. Suppose the firm wants to consolidate all its manufacturing into one facility. Where should it locate? Explain.

Refer to Appendix 6B and 6C for help in answering Problems 11–15.