Canada removed all duties and quotas on imports from Bangladesh in 2003. Since that time, Bangladesh has

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Canada removed all duties and quotas on imports from Bangladesh in 2003. Since that time, Bangladesh has become the second largest source (after India) of Canadian merchandise imports from South Asia. Totalling over \(\mathrm{C} \$ 1\) billion, the vast majority of these imports are garments and textile products. Low labor costs are a key attraction for Canadian retailers. Suppose the production function for a textile firm is \(q=K^{0.5} L^{0.5}\). What would be the minimum cost of producing 1,000 units of output if the cost of capital is the same in Country 1 and Country 2 (that is, \(r=\mathrm{Tk20,000}\) per month in each), but the cost of labor in Country 1 is half of that in the other country (that is, \(w_{2}=2 w_{1}=\) Tk10,000 per month)?

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Microeconomics

ISBN: 9781292215624

8th Global Edition

Authors: Jeffrey Perloff

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