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Von-Thnen Model with multiple cities There are two cities, A and B, where B is located 20 miles east of A. Both produce an identical
Von-Thnen Model with multiple cities
There are two cities, A and B, where B is located 20 miles east of A. Both produce an identical good and consumers' WTP=20 is the same everywhere. Marginal transportation cost is identical tB=tA=2. Each city prices its good at marginal cost. We know that cB=2; cA is unknown.
a)What is the maximum market reach of city B to its west?
b)Now assume there are unserved customers to the west of B (i.e., between A and B).
Calculate the minimum cA for this to be true.
noticetB=tA=2
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