Question

GLOBAL ECONOMICS 30 POINTS!

2. 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.

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).

Answer 1

The labor cost for each shirt is $0.15.
It would cost $217.50 to pay 5 workers in the U.S. to do the same job in the same amount of time.

Answer 2

$5.08 per shirt

Step-by-step explanation:

5 Indonesian laborers work 60 hours per week = 300 hours per week

they are paid $3.50 per day x 6 days x 5 workers = $105 per week

they produce 500 shirts per week, so the labor cost per shirt = $105 / 500 = $0.21 per shirt

if the firm operated in the US, they would need to pay each worker:

(40 x $7.25) + (20 x $10.88) = $507.60 per worker x 5 workers = $2,538

if they produce 500 shirts, the labor cost per shirt = $2,538 / 500 = $5.08 per shirt