Consider the above figure where the market area of a factory follows a "martini glass" pattern. Indicate on the graph and explain the effects of the following sequence of changes on the "martini glass" figure and the width of a factory's market area. The changes are cumulative. Use the options to fill in the blank explain why.

a. An innovation in production that doubles labor productivity in factories (currently they produce 10shoes/hr.) will [shorten, lengthen, not change] the stem of the martini glass from _______ gallons to _______ because.

b. The width of the market area increases from 14 miles (7 miles on each side) to _____ miles (______ on each side) because.

c. Next, an innovation in transportation that doubles consumer travel time (currently a 1-mile round trip costs 1/10 of an hour) will [decrease, increase, not change] the slope of the martini glass from ______ gallons per mile to _______gallons per mile because.

d. Finally, the width of the market area further increases from _______ miles (_____ on each side) to _______miles on each side) because.

Transcribed Image Text:

Milk (gallons) Cost: homemade shoes 1.00 0.40 0.30 7 1 0 7 Distance from factory Net price: factory shoes Milk (gallons) Cost: homemade shoes 1.00 0.40 0.30 7 1 0 7 Distance from factory Net price: factory shoes

Answer rating: 100% (QA)

a When there is innovation in production which in turn doubles the labor prod... View the full answer