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A U.S. firm is considering moving its production to Mexico. Its estimated production function is q = L0.5K0.5.  The U.S. factor prices are w = r = 10.  The Mexican factor prices are w* = 5, r* = 10.  What is the optimal input bundle (L,K) and cost of producing q = 100 units in U.S. and in Mexico?

Econometrics, Economics

  • Category:- Econometrics
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