Assume the distance between the resource (R ) and the market (M) is 15 miles. A firms
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Assume the distance between the resource (R ) and the market (M) is 15 miles. A firm’s procurement cost is given by PC=0.5x^2, where x is the distance from the resource measured in miles. The firm’s distribution cost is given by
DC=109-0.5x. Again, x is the distance from the resource.
(a) What is the Total Freight Cost at each milestone (i.e., x=0, 1, 2, 3, ...10). Where should the firm be located?
(b) How does your answer to all parts under (a) change if the marginal procurement cost were equal to zero?
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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