Question

AU.S. apparel manufacturer is considering moving its production abroad. Suppose its production function is: q=L0.60 0.40 In the United States, w = 6 and r = 4. At its Asian plant, the firm will pay a 50% lower wage and a 50% higher cost of capital: w* = 6/1.50 and r* = 1.50 x 4. What are L and K and what is the cost of producing q = 100 units in both countries? (for all responses, enter a real number rounded to two decimal places) In the U.S., Lis , K is and the cost of production is $ In Asia, Lis Kis , and the cost of production is $ What would the cost of production be in Asia if the firm had to use the same factor quantities as in the United States? The cost of production would be $

Answer 1

Asia 0. 4 - 4L + 6k + x 1 100 L od 4 + 1 l - kº") 0. 122 21. (-(06) 0.4k 2 L ak : 6 K L 16L - 36k 4 L = Ik 100. ( kº 0 100. "" ["}] L. K*. 139.33 61.08. ul. Cost of prod" in Asia 4x100 + 6x 100 = 1000.

0.4 k - web wa 6 wisu q : 100 T: 4 r. 6 cost cost' 6L + 4K 4L & GK 10.3.) (Asia) - xl-koch 0.6L" 22 : 6 2L dx = 4 - + -10.0 0.4 k-o. dk 6 . - KEL 0.6 K o.4 L = K² 100 =
cost of production in US = 1000

Cost of production in asia = 138×4 + 61×6 = 918