As a head of the planning commission of Midwest Motors, your job is to determine where to locate a new plant. Y
ou have access to the constant returns to scale technology y = S 1/2L 1/2 , 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?
