Consider these scenarios to see how prices for imported goods would be affected if foreign workers were paid the U.S. federal minimum wage of $7.25 in 2013. Be sure to show your calculations.

Question 1 : (12 Points)

A team of three laborers in Mongolia makes rugs by hand for export to the United States. The team works 14 hours a day, six days a week, 50 weeks a year, and is able to make 12 rugs a year. Each laborer is paid a wage that is equivalent to $1.10 per day. The rugs sell for $2,000 each in the United States.

a. You can calculate the labor costs of making the 12 rugs by multiplying the number of workers (3) by the number of days they work per week (6) by the number of weeks they worked (50) by the amount they each made per day ($1.10). What are the total labor costs involved in making these 12 rugs?

b. Calculate the company's profits by multiplying the number of rugs by the sales price for each, and then subtracting labor costs. How much profit does this company make every year?

c. If a team of three workers in the United States, each making the 2013 federal minimum wage of $7.25, produced these 12 rugs, what would the total labor costs be? First, calculate the number of hours each worker puts in each week by working six 14-hour days. That's 84 hours per week. In the United States, the law requires most employers to pay 1.5 times the hourly rate for overtime, which includes hours worked above 40 per week. So for 40 hours each week the workers would make $7.25 per hour and for the remaining 44 hours each week the workers would make $10.88 per hour. So in the United States, each one of the workers would make $768.72 per week. Multiply that by 50, the weeks worked to produce the 12 rugs, and remember all three workers produce the 12 rugs.

Question 2 : (12 Points)

A team of five laborers in Indonesia working in a garment factory divides the task of making men's dress shirts for export to the United States. Each laborer works 10 hours a day, six days a week, and is paid the Indonesian minimum wage of $3.50 per day. In one week, the team can make 500 shirts. The shirts sell for $40 each in the United States.

a. What are the labor costs for each shirt? You can figure this out by multiplying the number of workers by the number of days they work and the amount they are paid per day, and dividing the total by the number of shirts produced weekly.

b. How much would it cost to pay five workers working at the U.S. federal minimum wage to do the same job in the same amount of time? Remember, if the workers each work 60 hours per week, then they would make $7.25 per hour for the first 40 hours ($290 total per week), and $10.88 per hour for the remaining 20 hours ($217.60 per week).

c. What would the labor costs be for each shirt made in the United States?

Question 3 : (6 Points)

What would the economic implications for both exporting countries and importing countries be if the world were not so interdependent? Explain how a world with less interdependence would affect your life.