Question content area

Part $1$

A U$.$S$.$ apparel manufacturer is considering moving its production abroad. Suppose its production function$$ is:

q equals Upper L Superscript $0\mathrm{.}60$ Baseline Upper K Superscript $0\mathrm{.}40$q$=$L$0\mathrm{.}60$K$0\mathrm{.}40.$

In the United$$ States,

wequals$=66$

and

requals$=44.$

At its Asian$$ plant, the firm will pay a

$3030\%$

lower wage and a

$3030\%$

higher cost of$$ capital:

$$w$*$equals$=66/1\mathrm{.}301\mathrm{.}30$

and

$$r$*$equals$=1\mathrm{.}301\mathrm{.}30$times$44.$

Part $2$

What are L and K and what is the cost of producing

qequals$=100$

units in both$$ countries?$($for all$$ responses, enter a real number rounded to two decimal$$ places$)$

Part $3$

In the$$ U$.$S$.,$ L is enter your response here$,$ K is enter your response here$,$ and the cost of production is

$$$enter your response here.

Part $4$

In$$ Asia, L is enter your response here$,$ K is enter your response here$,$ and the cost of production is

$$$enter your response here.

Part $5$

What would the cost of production be in Asia if the firm had to use the same factor quantities as in the United$$ States?

Part $6$

The cost of production would be

$$$enter your response here.