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Question;1. We;focus again on the firm that produces baseball bats, using 10 tons of wood to produce;3 tons of bats. Regarding the transport rate, the cost per ton per mile was \$1;for the wood and \$2 for the bats. The forest is still located 10 miles from the;market.;(a) Illustrate;with a graph where should be the optimum location. What is the equation for the;Total Transport Cost?;(b) Now;we assume that the cost of shipping woods decreases from \$1 per ton to \$0.5 per;ton, while the cost of shipping bats remains \$2 per ton. Illustrate with a graph;where should be the optimum location. What is the equation for the Total;Transport Cost?;(c) The;forest burns down, forcing the firm to use wood from an another forest which is;now 15 miles from the market. The cost of shipping bats increases from \$2 per;ton to \$3 per ton, while the cost of shipping woods is now \$2 per ton.;(d) The;firms stars producing bats with wood and cork, using 3 tons of wood and 2 tons;of cork to produce 3 tons of bats. Cork is ubiquitous. The cost of shipping;bast remains \$3 per ton, while the cost of shipping woods remains \$2 per ton.;The distance between the market and the forest is still 15 miles.;2. Why;do breweries typically locate near their markets (far from their input;sources), while wineries typically locate near their input sources (far from;their markets)?;3. Consider;a firm that uses one transferable input to produce one output. The monetary;weight of the output is \$5, and the monetary weight of the input is \$3. The;distance between M (the market) and F (the input source) is 10 miles.;(a) Suppose;that production costs are the same at all locations. Using a diagram, explain;where the firm will locate.;(b) Suppose;that the cost of land (a local input) increases as one approaches the market.;Specifically, suppose that the cost of land is zero at F but increases at a;rate of \$3 per mile as the firm approaches M. Depict the location choice of the;firm graphically.;4. There;is a firm called HiTech which sells its product in city A. HiTech uses two;inputs, which it buys from firms located in city B and C. Both cities are 200;kilometers apart, and the distance between cities A and B, respectively, and;city C is 500 kilometers. HiTech sells its product on the local market in city;A for \$500. In order to manufacture its product, HiTech needs three units of;inputs from city B, which are \$1 per unit, and one unit from city C, which is;sold for \$2. The final product can be transported to city A without any cost.;Transport of one unit from B requires \$1 per 100 kilometers, and from C \$2 per;100 kilometers.;(a) Provide;a graph representing the above situation. A situation in which variable;transport costs of the output are zero (or negligible) is rather uncommon.;Mention and discuss one example.;(b) Give;a mathematical expression for the production function in this example. What is;the characteristic property of this production function, and what is the;marginal productivity of the production factors?;(c) Determine;the optimal location for HiTech as well as its transport costs and profits per;unit at this location. Provide a graph as well.

Paper#56366 | Written in 18-Jul-2015

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