Consider a manufacturing firm that exports its output from a port in the city center and...

  

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Consider a manufacturing firm that exports its output from a port in the city center and employs workers who live in a suburb six miles from the center. The daily freight cost is $9 per mile. The firm's daily labor cost increases from $20 at the suburb to $50 at the center. A. Using Figure 7-3 as a model, show the firm's labor cost, freight cost, and total cost for locations from the center to the suburb. Total cost is minimized at the [city center, suburb]. B. Suppose the intracity truck is introduced, decreasing the daily freight cost. The firm will be indifferent between the city center and the suburb if the daily freight cost is per mile. Illustrate with a graph. In this case, total cost in the suburb is_ computed as.... C. Suppose the daily freight cost per mile is three-fifths of the value you computed in part (B). Total cost is minimized at the [city center, suburb] with a cost of computed as.... Illustrate with a graph. D. For part (C), the firm chooses [city center, suburb] because the cost of moving its output one mile is while the cost of moving the workforce one mile is_ FIGURE 7-3 The Truck and the Suburbanization of Manufacturing 100 80 60 20 60 0 10 30 20 10 Total cost = Labor cost + Freight cost 0 10 Total transport cost (labor cost + freight cost) is minimized at the city center (the port) because the cost of moving output (on horse-drawn wagons) is high relative to the cost of moving workers (on streetcars). Freight cost Labor cost Labor cost ---Freight cost 10 Distance from port 0 Distance from workforce Total cost 10 Distance from port 0 Distance from workforce Total transport cost (labor cost + freight cost) is minimized at suburb (where workers live) because the cost of moving output (on trucks) is low relative to the cost of moving workers (on streetcars). Consider a manufacturing firm that exports its output from a port in the city center and employs workers who live in a suburb six miles from the center. The daily freight cost is $9 per mile. The firm's daily labor cost increases from $20 at the suburb to $50 at the center. A. Using Figure 7-3 as a model, show the firm's labor cost, freight cost, and total cost for locations from the center to the suburb. Total cost is minimized at the [city center, suburb]. B. Suppose the intracity truck is introduced, decreasing the daily freight cost. The firm will be indifferent between the city center and the suburb if the daily freight cost is per mile. Illustrate with a graph. In this case, total cost in the suburb is_ computed as.... C. Suppose the daily freight cost per mile is three-fifths of the value you computed in part (B). Total cost is minimized at the [city center, suburb] with a cost of computed as.... Illustrate with a graph. D. For part (C), the firm chooses [city center, suburb] because the cost of moving its output one mile is while the cost of moving the workforce one mile is_ FIGURE 7-3 The Truck and the Suburbanization of Manufacturing 100 80 60 20 60 0 10 30 20 10 Total cost = Labor cost + Freight cost 0 10 Total transport cost (labor cost + freight cost) is minimized at the city center (the port) because the cost of moving output (on horse-drawn wagons) is high relative to the cost of moving workers (on streetcars). Freight cost Labor cost Labor cost ---Freight cost 10 Distance from port 0 Distance from workforce Total cost 10 Distance from port 0 Distance from workforce Total transport cost (labor cost + freight cost) is minimized at suburb (where workers live) because the cost of moving output (on trucks) is low relative to the cost of moving workers (on streetcars).