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 labour.

The production function is Cobb-Douglas wheref(S,L) =S.5L.5,

whereSis tons of steel andLis units of labour.

You can locate your plant either in countryAor countryB.

In countryA, steel costs $7 a ton and labour costs $7 per unit.

In countryB, steel costs $8 per ton and labour costs $6 per unit.

In which country should the company locate its new plant so as to minimize costs per unit of output?

Question 9 options:

1)Country A

2)Country B

3)it doesn't matter--the two locations are equally costly

4)Country A if output is greater than 14, Country B otherwise.

5)Country B if output is greater than 14, Country A otherwise