. Consider an offshoring model in which a company is requires four activities to be completed, and is considering whether to locate each one in the U.S. or Mexico.

Certain assumptions are made for this model:

• Mexico has lower labor productivity. This is reflected by each activity requiring four times as much labor of each type in Mexico as in the U.S.
• Each activity varies in the ratio of high-skilled to low-skilled labor.
• U.S. workers of each skill type earn higher wages than their Mexican counterparts.

The four activities are:

Assembly: requires 24 units of low-skilled labor (LS) and 4 units of high-skilled labor (HS) if done in Mexico. Requires 6 units of low-skilled labor and 1 unit of high-skilled labor if done in the U.S. In both countries, the ratio of low-skilled to high-skilled labor is 6.

Component Production: requires 16 units of LS and 4 units of HS in Mexico, requires 4 units of LS and 1 unit of HS in the U.S. Ratio of LS to HS: 4.

Office Services: requires 16 units of LS and 8 units of HS in Mexico, requires 2 units of LS and 1 unit of HS in the U.S. Ratio of LS to HS: 2.

Research and Development: requires 4 units of LS and 40 units of HS in Mexico, requires 1 unit of LS and 10 units of HS in the U.S. Ratio of LS to HS: 0.1.

a) Fill in the blank cells in the following table by computing the costs of production of each activity in each country.

	Assembly	Component Prod	Office Services	R&D
United States
Mexico	$44
Imported from Mexico w/ 20% tariff
Imported from Mexico w/ 30%	$57.20
Imported from Mexico w/ 50%