Question
Suppose that consumers are located along a line, with location on the line denoted by x. You can think of this as a rural highway.
Suppose that consumers are located along a line, with location on the line denoted by x. You can think of this as a rural highway. For simplicity, denote the leftmost point on the line by 0 and the rightmost by 10. Suppose that there is a movie theater in the middle of the road (5 miles). Suppose that it charges, P = $6. In order to see a movie, a consumer must incur transportation costs that depend on the distance traveled to a firm. If the distance traveled is d, suppose that the costs of travel are 4 + 2d. Consumers decide between watching a movie at the theatre and staying home at watching whatever is on TV. Suppose that the movie is worth $12 more than the TV option. Solve for the firms market area in this situation
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