A firm is looking to locate its production facilities in one of two countries. The wage rate
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A firm is looking to locate its production facilities in one of two countries. The wage rate in Country 1 is 10 and the cost of capital is also 10 . The wage rate in Country 2 is \(20 \%\) higher, but the rental rate of capital is \(20 \%\) lower. The firm's production function is \(q=K^{0.2} L^{0.8}\). How much capital and labor would the firm use to produce 100 units of output in each country, and what would be the total cost of production in each?
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To minimize costs the firm will produce where M R T Sw r For the given production function ...View the full answer
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