ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Consider a manufacturing firm using human capital at home to produce two inputs, 'R & D' and 'components'. The firm combines the two inputs to produce computers.
Draw the following on a diagram with 'R & D' on vertical axis and 'components' on horizontal axis.
a. The
b. Isoquants of computer production.
c. Show the closed economy equilibrium and label the computer output as 100
d. The firm discovered that they can buy 'components' cheaply from a foreign country, and decided to outsource part of the production of those rather than producing all of them at home.
i. What happens to the relative price of 'R & D' and 'Components'.
ii. Show the change in a new diagram
iii. Show the level of output of computers
iv. Does the firm export 'R & D"?
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