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Questions › JNU › JNU SIS 2013 › Q3
4 marks, −1Microeconomics › Costs of production › Cost minimisation and long-run input choiceModerateabout 3 min

JNU SIS 2013 Question 3: Costs of production

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)=S12L12f(S,\ L) = S^{\frac{1}{2}} L^{\frac{1}{2}}f(S, L)=S21​L21​, where SSS is tons of steel and LLL is units of labour. The company can locate its plant either in country AAA or in country BBB. In country AAA, steel costs Rs 70 a ton and labour costs Rs 70 per unit. In country BBB, 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?

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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

Costs of production has come up 83 times in 7 exams since 2006.

What this question tests

This question is on Cost minimisation and long-run input choice, part of Costs of production in Microeconomics.

Choosing inputs to produce a given output at least cost, including across several plants.

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Question from the JNU SIS 2013 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.