1As 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 s^0.5L^0.5 Cobb-Douglas where f (S, L) ? S L , 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 (U.S.) a ton and labor costs $7 (U.S.) per unit. In country B, steel costs $8 (U.S.) per ton and labor costs $6 (U.S.) per unit.
(a) what will be the optimal combination of S and L used in the production of cars in Indonesia?
(b) what will be the optimal combination of S and L used in the production of cars in Vietnam?
(c) In which country should the company locate its new plant so as to minimize costs per unit of output?