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Business, 24.03.2021 16:40 glowbaby123

A U. S. electronics firm is considering moving its production abroad. Its production function is​ q= L^0.8K^0.2 (based on​ Hsieh, 1995), so its MPL= 0.8^0.2/ L^0.2 and its MPK=0.2L^0.8/ K^0.8.

In the United​ States, w​= 8$ and r=2. In​ Mexico, the wage is 20​% lower than in the United States but the firm faces the same cost of​ capital: ​w*= $6.40 and ​r*=2. What are L and K and what is the cost of producing q=100 units in both​ countries? In the​ U. S., L isnothing:

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