2) The following table shows the transport characteristics for a firm that produces fruit cans, using 5 tons of apple to produce 6 tons of cans. The transportation cost per ton of apple is $5 and the transportation cost per ton of can is $2. a) In the following table calculate the monetary weight of input and output. Table 2A-1 Monetary weights Physical weight (tons) Transportation rate (cost per ton per mile) Monetary weight Apple Cans b) Suppose that the apple farm in our example is 20 miles away from the market. In a well labeled graph depict procurement, distribution and total costs. c) What is the firm's optimal location choice? Explain.
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For the apple input: Monetary weight of apple input = Physical weight of apple input * Transportation rate per ton per mile For the can output: Monetary weight of can output = Physical weight of can output * Transportation rate per ton per mile Show more…
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