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2. a. Consider a farmer who produces with fixed proportions to a central market place. The rent for agricultural land at the market place is $1,000 per hectacre, and the shipping costs to ship the production of a hectacre is $100 per mile. Plot the land rent as a function of distance the market place

2. a. Consider a farmer who produces with fixed proportions to a central market place. The rent for agricultural land at the market place is $1,000 per hectacre, and the shipping costs to ship the production of a hectacre is $100 per mile. Plot the land rent as a function of distance the market place

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. a. Consider a farmer who produces with fixed proportions to a central market place. The rent for agricultural land at the market place is $1,000 per hectacre, and the shipping costs to ship the production ofa hectacre is $100 per mile. Plot the land rent as a function of distance the market place b. Draw an alternative bid-rent curve for land assuming lower costs near the market due to better roads and very high shipping costs further out. This picture can be drawn free hand. Only the shape matters. c. Now suppose that there are two farming activities: one with fixed proportions and one with substitution. Draw a picture that shows the bid rent curve for the fixed proportion in a. and also a free hand curve for production with substitution. The picture should be drawn so that the flexible farming wins the bid for land near the market place.
Transcribed Image Text:2. a. Consider a farmer who produces with fixed proportions to a central market place. The rent for agricultural land at the market place is $1,000 per hectacre, and the shipping costs to ship the production ofa hectacre is $100 per mile. Plot the land rent as a function of distance the market place b. Draw an alternative bid-rent curve for land assuming lower costs near the market due to better roads and very high shipping costs further out. This picture can be drawn free hand. Only the shape matters. c. Now suppose that there are two farming activities: one with fixed proportions and one with substitution. Draw a picture that shows the bid rent curve for the fixed proportion in a. and also a free hand curve for production with substitution. The picture should be drawn so that the flexible farming wins the bid for land near the market place.
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