Because wage rates are so low in Africa, why don't Microsoft, Cisco and other major corporations close down their American operations and move to Africa?

What will be an ideal response?


Wage rates must be weighed against productivity. It is not just wages that influence where production occurs. Wages divided by the productivity of the workers gives the average cost of production. In Africa, workers have low levels of skill, education, and training so their productivity is much less than in the United States. Therefore the cost of production would be far higher in Africa than in America. So even though U.S. wage rates are high, industries stay here because the cost of production is lower because U.S. productivity is so high.

Economics

You might also like to view...

If an employer cannot distinguish the ability of workers, a separating equilibrium will result

Indicate whether the statement is true or false

Economics

Developing countries

a. do not benefit from foreign aid b. do not benefit from private investment c. generate less than half of their annual flow of foreign exchange from exports d. must acquire foreign exchange in order to pay for imports e. need to decrease labor productivity

Economics

Taxes

A. are mandatory payments. B. are necessary for financing government expenditures. C. do not directly relate to the benefit of government goods and services received. D. all of these answer options are correct.

Economics

The dominant firm in an oligopoly is the firm that ______.

a. produces a large portion of the total output b. undercuts the prices of its competitors c. provides an entry incentive to other firms d. practices perfect competition

Economics