mponents from the United States to China for final assembly in China
Ship automobile bodies and some components from the United States to China where Chinese-made components will be added in the final assembly work in China
In relation to consequences, initial production costs will be lower if bodies and components are shipped from the United States to China for final assembly, and initial costs will be even lower if some components are manufactured in China. An adverse consequence, however, is that the fault rate in assembly and component production is higher in China than it is in the United States. Therefore, final costs will be higher if assembly work and some component production is does in China, before worker productivity in China rises to the level of that in the United States.
Optimally, therefore, the decision reached through the application of the ration
...