Question
Assume the distance between the resource (R ) and the market (M) is 15 miles. A firms procurement cost is given by PC=0.5x^2, where x
Assume the distance between the resource (R ) and the market (M) is 15 miles. A firm’s procurement cost is given by PC=0.5x^2, where x is the distance from the resource measured in miles. The firm’s distribution cost is given by
DC=109-0.5x. Again, x is the distance from the resource.
(a) What is the Total Freight Cost at each milestone (i.e., x=0, 1, 2, 3, ...10). Where should the firm be located?
(b) How does your answer to all parts under (a) change if the marginal procurement cost were equal to zero?
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a To find the Total Freight Cost at each milestone we need to calculate the sum of the procurement c...Get Instant Access to Expert-Tailored Solutions
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Microeconomics An Intuitive Approach with Calculus
Authors: Thomas Nechyba
1st edition
538453257, 978-0538453257
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