In which country should the company locate its new plant

Reference no: EM13239895

As head of the planning division of Eastern Motors, your job is to determine where to locate a new plant. The only inputs used in your cars are steel and labor and the production function is Cobb{Douglas where f(S;L) = S^0.5L^0.5 where S is the tons of steel and L is the units of labor. You can locate your plant either in country A or in country B. In country A, steel costs $7 a ton and labor costs $7 per unit. In country B, steel costs $8 a ton and labor costs $6 per unit. In which country should the company locate its new plant so as to minimize costs per
unit of output.

Reference no: EM13239895

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