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Unformatted text preview: cars in Germany, in a high-productivity plant, or in Mexico in a lower productivity plant. The production function for cars in the German plant is Q =min(3K,2L), while the production function for cars in the Mexican plant is Q=min(K,L) a) If the wage rate in Germany is w G , and the rental rate of capital is v (the same in both countries), what is the cost function for cars in Germany (Mexico)? b) If the wage rate in Mexico is w M , and the rental rate of capital is v (the same in both countries), what is the cost function for cars in Mexico? c) Suppose capital is fixed in each country. Find the short run cost function. Answer a) C G =Q[v/3+w G /2], b) C G =Q[v+w M ] c) C G =vK G +w G Q/2, C M =vK m +w m Q...
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- Spring '08
- Economics, marginal cost Draw