Asked by
Marsellina Purnawan
on Oct 14, 2024
Verified
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.
Cobb-Douglas
A form of production function used in economic modeling, characterized by its representation of the relationship between two or more inputs and the resulting output.
Minimize Costs
The process of finding ways to decrease expenses and reduce the amount it costs to produce a good or offer a service.
Units of Labor
Quantitative measures representing the workforce or the effort exerted by workers in the production of goods and services.
- Ascertain the most advantageous levels of production and input configurations for reducing costs.
Verified Answer
MH
Learning Objectives
- Ascertain the most advantageous levels of production and input configurations for reducing costs.