Some firms produce in both China and the United States. Suppose that the marginal product of capital

Question:

Some firms produce in both China and the United States. Suppose that the marginal product of capital in the United States is 100 units of output per hour, and the real rental is $50. Assume further that the marginal product of capital in China is 20, and the real rental rate on capital is $5.
a. All other things being equal and assuming that labor cannot be moved from one country to another, should firms move production from the United States to China or vice versa? Explain your answer in terms of profit maximizing employment decisions for firms.
b. What would happen to the marginal product of capital in each country if this reallocation occurred? What would happen to real wages? Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of...