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A car manufacturing company wants to decide where to locate a new plant. The only
inputs used in cars are steel and labour, and the production function is f (S, L) = (S^1/2)(L^1/2),
where S is tons of steel and L is units of labour. The company can locate its plant either
in country A or in country B. In country A, steel costs Rs 70 a ton and labour costs
Rs 70 per unit. In country B, steel costs Rs 80 per ton and labour costs Rs 60 per unit.
In which of the two countries should the company locate its new plant?
(a) Country A
(b) Country B
(c) It is indifferent between country A and country B
(d) The information given is not sufficient to determine
I just want to know the approach for solving this question as using pMP=W is not really helping here.
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