Introduction: Logitech was founded in 1981 in Apples, Switzerland and is run by Guerrino De Luca, Chairman of the Board, and Gerald P. Quindlen, President and Chief Executive Officer. The offices are in Fremont, California, Romanel-sur-Morges, Switzerland, Hong Kong, China, Suzhou, China, Hsinchu, Taiwan, and Tokyo, Japan. Logitech products are distributed in more than 100 countries worldwide through retail channels or via strategic partnerships with top-tier PC manufacturers. Logitech has sales offices in major cities in North America, Europe, and Asia Pacific. Logitech is listed on the Nasdaq Global Select Market under the symbol LOGI and on the SIX Swiss Exchange under the symbol LOGN. Logitech has four subsidiaries: (1) LifeSize, (2) WiLife, (3) Slim Devices, and (4) 3D Connexion.
1. In a world without trade, what would happen to the costs that American consumers would have to pay for Logitech’s products?
1. In a world without trade, the costs that American consumers would have to pay would be very high. The product that the case study gives for an example, Wanda, retails for $40, of which only $3 is the production cost from China. This $3 cost would rise immensely if production was in the United States because the American economy demands high wages.
2. Explain how trade lowers the costs of making computer peripherals such as mice and keyboards.
1. It is amazing to think that trade helps to lower the costs of a product. As we saw in the previous question, if the United States were to build a product entirely domestically, the retail price would not be feasible to most consumers. With trading in place it allows for economies of scale. The technology can be developed in one country, the ergonomics in another country, the production in another country, and the assembly in yet another country. The shipping costs are much less than it would be to perform these tasks in one country. This is called absolute advantage, where someone is great at one thing....