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A firm can use three different production technologies, with capital and labor requirements at each level of output as follows: TECHNOLOGY 1 TECHNOLOGY 2 TECHNOLOGY

A firm can use three different production technologies, with capital and labor requirements at each level of output as follows:

 

TECHNOLOGY 1

TECHNOLOGY 2

TECHNOLOGY 3

Daily

 

 

 

 

 

 

Output

K

L

K

L

K

L

100

3

7

4

5

5

4

150

3

10

4

7

5

5

200

4

11

5

8

6

6

250

5

13

6

10

7

8

a. Suppose the firm is operating in a high-wage country, where capital cost is $100 per unit per day and labor cost is $80 per worker per day. For each level of output, which technology is the cheapest?

b. Now suppose the firm is operating in a low-wage country, where capital cost is $100 per unit per day but labor cost is only $40 per unit per day. For each level of output, which technology is the cheapest?

c. Suppose the firm moves from a high-wage to a low-wage country but its level of output remains constant at 200 units per day. How will its total employment change?

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