3/a) Canada Post delivers packages for big and small companies. That fact they deliver all over a city every day, which simplifies the job: relative to a delivery company which works for one company, Canada Post benefits from economies of scope. Compared to the situation where consumers have to travel to the seller, show how using Canada Post would affect the market area of a seller who specializes in a good which is demanded by 0.1 percent of the population.

b) Given the following information, does the market area for a store with no competitors nearby change between i) and ii)?

i) All consumers are willing to pay $12, while the store charges $6 and the (round-trip) transportation cost per km. is $0.5.

ii) After a change in speed limits near the store and far away, the (round-trip) transportation cost per km. is $1 for the first 2 km. and 0.1 for each additional km thereafter.