Consider the produetion function: f(K,L) = K*L%. Let w and r denote the price of labor and capital. (a) Find the cost minimizing input bundle as a function of w, r, and q. Find the cost function. (b) Suppose two countries, A and B, have the access to the same production technology f(-) given above. Firms in both countries are cost-minimizers. Yet, the firm in country A uses relatively more labor and less capital than the firm in country B to produce the same level of output. What will ex- plain this?
Consider the produetion function: f(K,L) = K*L%. Let w and r denote the price of labor and capital. (a) Find the cost minimizing input bundle as a function of w, r, and q. Find the cost function. (b) Suppose two countries, A and B, have the access to the same production technology f(-) given above. Firms in both countries are cost-minimizers. Yet, the firm in country A uses relatively more labor and less capital than the firm in country B to produce the same level of output. What will ex- plain this?
Chapter1: Making Economics Decisions
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![2. Consider the production function: f(K,L) = K*L%. Let w and r denote the price
of labor and capital.
(a) Find the cost minimizing input bundle as a function of w, r, and q. Find
the cost function.
(b) Suppose two countries, A and B, have the access to the same production
technology f(-) given above. Firms in both countries are cost-minimizers.
Yet, the firm in country A uses relatively more labor and less capital than
the firm in country B to produce the same level of output. What will ex-
plain this?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F93d78a7c-cba1-4331-9699-87fb481e1060%2Fdcfe6cb8-c06e-495f-936a-6ec7ece7ab6e%2Fg9zxtvw_processed.jpeg&w=3840&q=75)
Transcribed Image Text:2. Consider the production function: f(K,L) = K*L%. Let w and r denote the price
of labor and capital.
(a) Find the cost minimizing input bundle as a function of w, r, and q. Find
the cost function.
(b) Suppose two countries, A and B, have the access to the same production
technology f(-) given above. Firms in both countries are cost-minimizers.
Yet, the firm in country A uses relatively more labor and less capital than
the firm in country B to produce the same level of output. What will ex-
plain this?
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