A firm that produces its output in Asia and sells it in the United States has one
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In country 1 the wage rate is W = 1 and the price of capital is R = 1. In country 2 the wage rate is W = 1 but the price of capital is R = 4. In addition, in country 1 any plant that operates must pay a permit fee of $20,000 per month, while in country 2 any plant that operates must pay a permit fee of $10,000 per month. The permit fee is an avoidable fixed cost: if the plant is shut down it doesn't need to be paid. Assume for simplicity that there are no costs of shipping the product from Asia to the United States. What is the supply function of this firm?
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