A USfirm Currently Produces 200 Units of Output According to the the Production

question 54

Multiple Choice

A U.S.firm currently produces 200 units of output according to the production function q = L^0.5K^0.5 and faces input prices equal to w^U.S. = r^U.S = $11.Should the U.S.firm move their company abroad where they will face input prices equal to w^abroad = $6.50 and r^abroad = $15.00?

• A) Yes, because the total costs will fall from $3,859 to $2,810.
• B) No, because the total costs will increase from $2,810 to $3,859.
• C) No, because the firm has decreasing returns to scale.
• D) Not enough information is given to answer this problem.

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Definitions:

Bank Statement

A document provided by a bank that summarizes an account holder's transactions and balances over a specific period of time.

Outstanding Deposits

Deposits that have been made to an account but not yet credited or available for use.

Outstanding Checks

Outstanding checks are checks that have been written and recorded in the account ledger but have not yet been cashed or cleared by the bank.

Reconciled Balance

The balance of an account after all discrepancies have been analyzed and adjustments have been made to reflect the true amount.