This preview shows page 1. Sign up to view the full content.
Unformatted text preview: 2 k 1 / 2 and the rental price of capital is 16. However, wages are 4 and the rm must pay a xed cost of 10000 to operate in the developing country if it chooses to produce any shirts there. (a) Explain why it is optimal for the rm to produce all the shirts at one of the two plants. (b) Given the optimal choices of k and l , what are the costs associated with producing 1000 shirts in the U.S.? In the developing country? Where will the rm produce? (c) Unions are outraged at the low wages payed by PEW in the developing country and demand that wages in the developing country increase to 9. How does this aect the demand for labor in the developing country? In the U.S.? 1...
View Full Document
- Fall '09