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1.Wheat can only be sold at a central market place M. All producers that do not produce it at M need to haul it there in 11order to sell it and will incur transportation cost. People are willing to pay $222 per ton of wheat; its marginal production cost equals $10 per ton. Freight cost per ton and mile is given by T=2x0.5, where x denotes the distance from M in miles. (a) Calculate the maximum distance to the east of M at which the good will be produced. (b) Do the transportation cost exhibit increasing, decreasing or constant economies to distance?
2. Refer to the one-directional (just to the east) von-Thünen Model and assume that the willingness-to-pay for wheat is $42.50 per bushel. Marginal cost production equals $7.50 per bushel and fixed production cost is $10. a) We find that the marginal wheat fields (i.e., those with the maximum distance from the market place) are located 5 miles from the market place. Assuming constant marginal transportation cost, what is t? b) What is the land rent at x=0
3. Assume the distance between the resource (R ) and the market (M) is 10 miles. A firm’s procurement cost is given by PC=20+9x, where x is the distance from the resource measured in miles. The firm’s distribution cost is given by DC=(10-x)3. Again, x is the distance from the resource. (a) What is the Total Freight Cost at x=10, x=5, x=0. Where should the firm locate? (b) How does your answer to all parts under (a) distribution cost also includes a fixed (i.e., distance-independent) cost of 20?
The supply and demand curves for mousetraps cross at a price of $10 apiece. There is and always has been a price ceiling of $6 per mousetrap. Now the government imposes an excise tax of $2 per mousetrap (while maintaining the $6 price ceiling). Illus..
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With respect to tariffs and quotas, it can generally be said that:
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Classical economists believe that. keynesian economists believe that. In dealing with the "great recession", the obama administration has largely followed the policies of ____________
Consider both sides of the argument and come to a decision of whether to close the plant or continue to operate it. How would you explain to either the president or the CEO that he or she is wrong?
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