You own a firewood business that involves chopping down trees, cutting the trees up into firewood, and transporting to the market. You can cut the trees up into firewood where they are cut down, or you can transport the trees to the market and then cut them into firewood. The costs of the various operations are as follows:

Cutting down trees $25 per ton Cutting trees into firewood $100 per ton Transporting trees to market $50 per ton Transporting firewood to market $35 per ton

a. Where should the trees be cut into firewood to minimize costs? Why? What data did you need to make this decision?

b. Suppose that the price of firewood at the market is $150 per ton. Where should the trees be cut into firewood now? What if the price increased to $175 per ton?