A U.S. electronics manufacturer is considering moving its production abroad. Suppose its production function is
q=L^(0.8)K^(0.2)
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? (for all of the following questions, enter a numeric response using a real number rounded to two decimal places)
In the U.S.,
L is
◻
K is
◻ and the cost of production is $
◻
In Mexico, L is
◻ ,
K is
◻ and the cost of production is
$
◻
