Question

The company's shipments of newly-produced branded and private-label footwear from its production facilities to its regional distribution centers are subject to

a. prevailing per pair shipping/freight charges, plus any applicable import tariffs and exchange rate adjustments on pairs shipped from a production facility in one region to distribution center/warehouse in a different geographic region.
b. export fees equal to 7.5% of the manufacturing costs of the pairs shipped and exchange rate shifts of as high as 10% on cross-region shipments.
c. import tariffs of $3 per pair, shipping fees of $2.00 per pair, and exchange rate shifts of as high as 10% on cross region shipments.
d. 2 million-pair import quotas on all shipments from foreign production facilities to distribution centers/warehouses in Europe-Africa.
e. shipping charges of $0.50 per pair on all pairs shipped to distribution centers in the same region as the production facility and $1.00 on all pairs shipped from production facilities in one region to distnbution centers/warehouses in another geographic region.

Answer 1

When countries shift production toward their areas of comparative advantage, their combined production of both goods rises.

Step-by-step explanation:

When countries shift production toward their areas of comparative advantage, their combined production of both goods rises. In the given scenario, the United States transfers labor toward producing refrigerators, resulting in a decrease in shoe production but an increase in refrigerator production. Meanwhile, Mexico transfers labor toward producing shoes, causing a decrease in refrigerator production but an increase in shoe production. This demonstrates the benefits of specialization and trade, as both countries can produce more of both goods by focusing on what they are relatively better at.