As Head of the Planning Commission of Eastern Motors, Your

Multiple Choice

As head of the planning commission 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.5L.5, where S is tons of steel and L is units of labor.You can locate your plant either in country A or country B.In country A, steel costs $7 a ton and labor costs $7 per unit.In country B, steel costs $8 per 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?

A) Country A.
B) Country B.
C) It doesn't matter, because the two locations are equally costly.
D) Country A if output is greater than 14, and country B otherwise.
E) There is not enough information to enable us to tell.