Suppose that Flamerock Tires must decide where to produce one million tires: the US, where wages are 30 and the cost of capital is 5; or China, where wages are 5 and the cost of capital is 25. Production in each location follows the same technology (production function) given by: Q = f(L, K) = L^0.25 K^0.75 Computationally solve the cost - minimizing input levels in each location to produce the goal of 1 million tires

Suppose that Flamerock Tires must decide where to produce one million tires: the US, where wages are 30 and the cost of capital is 5; or China, where wages are 5 and the cost of capital is 25. Production in each location follows the same technology (production function) given by: Q = f(L, K) = L^0.25 K^0.75 Computationally solve the cost - minimizing input levels in each location to produce the goal of 1 million tires

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose that Flamerock Tires must decide where to produce one million tires: the US, where wages are 30 and the cost
of capital is 5; or China, where wages are 5 and the cost of capital is 25. Production in each location follows the same
technology (production function) given by: Q = f(L, K) = L^0.25 K^0.75 Computationally solve the cost - minimizing
input levels in each location to produce the goal of 1 million tires

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