QUESTION 4: (LONG RUN COSTS) (20 pts) A seafood processing company uses two inputs: machines (K) and workers (L). The isoquants have the usual smooth shape. The machines cost $12000 per day to run, and the workers earn $200 per day. At current level of production, the marginal product of each machine is an additional 400 pounds of seafood per day, and the marginal product of labor is 80 pounds per day. Is this firm producing at lowest possible cost? If the firm is not minimizing cost, explain how the firm should change the ratio of its inputs to lower its cost. QUESTION 5: (LONG RUN COSTS) (25 pts) An auto manufacturer in India is considering moving its production to a plant in Vietnam. Its estimated production function is q = 2 L0.5 K0.5. The factor prices in India are w = 300 and r = 1200. In Vietnam, the wage is 20% less, but the firm faces the same cost of capital, ie: w* = 240 and r* = r = 1,200. What is the cost minimizing combination of capital and labor (K and L) in both countries if the desired level of output is q = 20 units? Illustrate the isoquant and isocost curves if production takes place in India and in Vietnam.