Multinationals operating in China has been setting up factories deep in the interior in search of affordable labor. For companies exporting to Europe shipping by air is too expensive. Hewlett -Packard -HP has transported 4 million notebook computers by rail. Shipping one container by rail costs $ 10,000, one-third the price of air transit. It takes only 21 days to ship by rail, 40 days by sea. Shipping costs are factor cost for suppliers.
A. In your opinion will HP lower laptop prices or just increase profits?
B. What is the price of air transit? Are marginal benefits greater than marginal costs?