Suppose there is a single cheese factory in Wisconsin. The factory competes with homemade cheese, and will
Question:
Suppose there is a single cheese factory in Wisconsin. The factory competes with homemade cheese, and will sell cheese to any household for which the net price of cheese is less than the production cost of homemade cheese. A homemade cheese takes an hour to produce for a consumer. Alternatively, she can produce a loaf of bread within an hour. The net price of a block of cheese produced at the factory is the factory price for the block of cheese, 1/6 loaves of bread, and the opportunity cost of travel to and from the factory to buy cheese. If a consumer travels to the factory to buy cheese, she bears a travel cost of 1/24 hour per round-trip mile: it takes 1/24 hour to complete a round-trip mile in each direction.
1. [2 points] What is the size of the market area of the cheese factory?
2. [2 points] Illustrate your answer.
Statistics For Managers Using Microsoft Excel
ISBN: 9780133130805
7th Edition
Authors: David M. Levine, David F. Stephan, Kathryn A. Szabat