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?

Answer rating: 100% (QA)

a To find the Total Freight Cost at each milestone we need to calculate the sum of the procurement c... View the full answer