3.6 An auto manufacturer in India is considering moving its production to a plant in Vietnam. Its...
Question:
3.6 An auto manufacturer in India is considering moving its production to a plant in Vietnam. Its estimated production function is q = 2L0.5K0.5. The factor prices in India are w = 300 and r = 1,200. In Vietnam, the wage is 20% less, but the firm faces the same cost of capital: w* = 240 and r* = r = 1,200.
What are L and K, and what is the cost of producing q = 20 units in both countries?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Managerial Economics And Strategy
ISBN: 9780135640944
2nd Global Edition
Authors: Jeffrey M. Perloff, James A. Brander
Question Posted: