Question

Consider a manufacturing industry that exports its output by ship. Each firm has totalrevenue per month of $1,400 and a monthly nonland production cost of $400. Each firm initiallytransports its output from the factory to the port on trucks. A firm’s monthly freight cost is $100per mile from the port. Suppose a matter transmitter is introduced. For a monthly cost of $300,a firm can use a transmitter to transport its output, at zero cost, for up to 7 miles. Draw two bidrent curves for manufacturers, one for firms that use the truck and one for firms that use thetransmitter, for up to 10 miles from the port

Answer 1

FIRMS USE TRUCKS AT LOCATIONS FROM 0 TO 8 BLOCKS FRO M THE PASR ALSO FOR LOCATIONS FROM 7 TO 10 BLOCKS FROM THE PAST

THE REASON IS BETWEEN 0 TO 3 BLOCKS THE TERM AS TO PAYLESS AS FLEX WHILE FIRST OPTION

THUS 0 TO 3 BLOCKS IS REPRESENTS TO CHOOSE OPTION -----1

B ] THE EXACT AND ONE OF THE FIRMS THAT USE THE TRANSMISSION FOR UP TO 10 MILES FROM THE PAST

THE TRANSMISSION IS USED IN THE INTERVAL 3 BLOCKS TO 7 BLOCKS

THE REASON IS THAT THE COSZT OF FREIGHT IS LESS OPTION 2