Domestic, Canadian, and Asian manufacturers supply furniture in the United States. They produce furniture in two formats - fully assembled, and ready-to-assemble in kits which the consumer must assemble at home. Manufacturing of furniture is relatively labor-intensive.

1. How do wages affect the relative cost of manufacturing fully assembled compared to ready-to-assemble furniture? 2. Asian manufacturers benefit from lower wages. Using suitable diagrams, illustrate how the entry of Asian manufacturers would affect the US supply of: (i) fully assembled; and (ii) ready-to-assemble furniture. 3. Using either of your diagrams for (b), show how a reduction in the cost of shipping would affect the supply of furniture. 4. Which do lower shipping costs affect relatively more: Asian exports of fully assembled or ready-to-assemble furniture?