Question

Say that the hourly cost to employers per German industrial worker was $44. The hourly cost to employers per U.S. industrial worker was $34. while the average cost per Taiwanese industrial worker was $20. Give three reasons why firms produce in Germany rather than in a lower-wage country.

Answer 1

Answer:

Germany has some strategic advantages discussed below.

Explanation:

Germany is a nation within the European Union and this gives it some advantages than other low cost economies like U.S and Taiwan.

1. Germany has a comparative advantage in technology. With the high level of technological development in Germany the country is a perfect place for producing quality product. Since it uses more of capital intensive production, the man hours required will be low.

2. There is free flow of goods, services, and workers accross EU states. This will reduce cost of procurement of raw materials needed in production. In other low cost economies transportation may attract high cost that will not justify the lower wages.

3. The use of common currency with surrounding countries will reduce tarrifs and other related charges with importation of goods needed in production process in Germany.