Question
Canada removed all duties and quotas on imports from Bangladesh in 2003. Since that time, Bangladeshhas become the second largest source (after India ) of
Canada removed all duties and quotas on imports from Bangladesh in 2003. Since that time, Bangladeshhas become the second largest source (after India ) of Canadian merchandise imports from South Asia. Totalling over C$1 billion, the vast majority of these imports are garments and textile products. Low labor costs are a key attraction for Canadian retailers. Suppose the production function for a textile firm is q = K0 5L0 5 . What would be the minimum cost of producing 1,000 units of output if the cost of capital is the same in Country 1 and Country 2 (that is, r = Tk20,000 per month in each), but the cost of labor in Country 1 is half of that in the other country (that is, w2 = 2w1 = Tkl0,000 per month)? (Hint: See Solved Problem 7.3.)
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