4) A manufacturing firm produces power drills that it sells at a market price of $100/drill and ships tomarkets around the country out of a central freight terminal. Intermediate inputs cost $10/drill. Itcosts the firm $1 per mile to ship each drill from the factory at location X to the freight terminal.Direct labor costs are $20/drill and one-way commuting cost is $1/mile from the residential zonethat is 8 miles from the central freight terminal.a) What is the firm's bid rent curve for land, r(x)?b) What rent is the firm willing to pay at X=2?c) Suppose commuting costs increase from $1 to $2 per one-way mile. Find the new bid rent curvefor land.d) What rent is the firm willing to pay at X=2?

Market price : The market price refers to the price at which a product or service is…

b) What rent is the firm willing to pay at X=2? c) Suppose commuting costs increase from $1 to $2 per one-way mile. Find the new bid rent curve for land. d) What rent is the firm willing to pay at X=2?

b) What rent is the firm willing to pay at X=2? c) Suppose commuting costs increase from $1 to $2 per one-way mile. Find the new bid rent curve for land. d) What rent is the firm willing to pay at X=2?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis

Section: Chapter Questions

Problem 9TY

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Question

4) A manufacturing firm produces power drills that it sells at a market price of $100/drill and ships to
markets around the country out of a central freight terminal. Intermediate inputs cost $10/drill. It
costs the firm $1 per mile to ship each drill from the factory at location X to the freight terminal.
Direct labor costs are $20/drill and one-way commuting cost is $1/mile from the residential zone
that is 8 miles from the central freight terminal.
a) What is the firm's bid rent curve for land, r(x)?
b) What rent is the firm willing to pay at X=2?
c) Suppose commuting costs increase from $1 to $2 per one-way mile. Find the new bid rent curve
for land.
d) What rent is the firm willing to pay at X=2?

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