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Assignment on long run costs

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(LONG RUN COSTS)

Now suppose that in an effort to incentivize investment in India, the Indian government decides to subsidize wages at a rate of 25%, ie: the Indian government is now paying 25% of wages. What effect will this have on the cost minimizing combination of capital and labor in India? (You can again assume that the desired level of output is 20 units).

Illustrate the new situation in India by using isocost and isoquant curves after the subsidy.

Reference no: EM133082284

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