A U.S. electronics firm is considering moving its production abroad. Its production function is 0.6„0.4 q =L0.°Ko" (based on Hsieh, 1995), so its MP = 0.6K“ /LO* : and its MPK = 0.4L0.° /KO.6. In the United States, w = $6 and r=4. In Mexico, the wage is 50% lower than in the United States but the firm faces the same cost of capital: w* = $3.00 and r* = 4. What are L and K and what is the cost of producing q = 100 units in both countries? (for all of the following questions, enter a numeric response using a real number rounded to two decimal places) In the U.S., L is

A U.S. electronics firm is considering moving its production abroad. Its production function is 0.6„0.4 q =L0.°Ko" (based on Hsieh, 1995), so its MP = 0.6K“ /LO* : and its MPK = 0.4L0.° /KO.6. In the United States, w = $6 and r=4. In Mexico, the wage is 50% lower than in the United States but the firm faces the same cost of capital: w* = $3.00 and r* = 4. What are L and K and what is the cost of producing q = 100 units in both countries? (for all of the following questions, enter a numeric response using a real number rounded to two decimal places) In the U.S., L is

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.7P

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