Note : Hand written solution is not allowed. Suppose Honda operates a car engine manufacturing plant in Canada and one in Mexico. Supposefurther that engine construction, once a given technology is in place, does not allow for substitutionbetween labor and capital in production (workers and machines are always paired in the same ratio.)The plant in Canada operates according to the following production function: qc = min(2L, K),where quantity is measured in engines/hour. Since the price of labor in Mexico is cheaper, the plant inMexico uses more labor-intensive technology and has the production function: q = min(L, 2K).Draw the qc = 80 engines/hour isoquant for the Canada plant. Mark the point of efficientproduction for qc = 80 (call it point A). Using a different color, draw the q = 80engines/hour isoquant for the Mexico plant. Mark the point of efficient production for qM =80 (call it point B). (The efficient point of production involves no waste of factor inputs.)b. Suppose Honda wanted to produce 40 engines at the Canada plant, and 40 engines in theMexico plant. How much labor and how much capital will be needed at the Canada plant?How much labor and capital will be needed at the Mexico plant? Add the inputs to determinehow much labor and capital Honda needs overall to split production in this fashion. Mark thispoint (C) on the graph you drew at part (a).c. Now let's say the firm wanted to produce 60 engines at the Canada plant, and 20 engines atthe Mexico plant - how much of each input is needed at each plant? How much of each inputdoes Honda use overall? Mark this point (D) on the graph.d. What if the firm wanted to produce 20 engines in Canada and 60 engines in Mexico? Find theinputs needed at each plant, then mark the firm's total input use on the earlier graph (E).

Given,The production function of Honda's car engine manufacturing unit in Canada is The production…

Suppose Honda operates a car engine manufacturing plant in Canada and one in Mexico. Suppose further that engine construction, once a given technology is in place, does not allow for substitution between labor and capital in production (workers and machines are always paired in the same ratio.) The plant in Canada operates according to the following production function: qc = min(2L, K), where quantity is measured in engines/hour. Since the price of labor in Mexico is cheaper, the plant in Mexico uses more labor-intensive technology and has the production function: q = min(L, 2K). Draw the qc = 80 engines/hour isoquant for the Canada plant. Mark the point of efficient production for qc = 80 (call it point A). Using a different color, draw the q = 80 engines/hour isoquant for the Mexico plant. Mark the point of efficient production for q = 80 (call it point B). (The efficient point of production involves no waste of factor inputs.) b. Suppose Honda wanted to produce 40 engines at the Canada plant, and 40 engines in the Mexico plant. How much labor and how much capital will be needed at the Canada plant? How much labor and capital will be needed at the Mexico plant? Add the inputs to determine how much labor and capital Honda needs overall to split production in this fashion. Mark this point (C) on the graph you drew at part (a). c. Now let's say the firm wanted to produce 60 engines at the Canada plant, and 20 engines at the Mexico plant - how much of each input is needed at each plant? How much of each input does Honda use overall? Mark this point (D) on the graph. d. What if the firm wanted to produce 20 engines in Canada and 60 engines in Mexico? Find the inputs needed at each plant, then mark the firm's total input use on the earlier graph (E).

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.10P