Question

Use the table below to calculate the bid rent for manufacturing in Burgville in dollars per acre. You must get all 5 to receive full credit. Do NOT include dollar signs. Also, responses should include dollars and cents. For example, 150 dollars should be entered as 150.00. Distance (Miles) Total Revenue Non-land Cost Freight Cost Willingness to Pay for Land Production Site (Acres) Bid Rent ($/Acre) $500 0 $ 100 $400 4 $500 10 100 $390 4 2 $500 20 100 $380 4 $500 100 30 $370 4 4 $500 100 40 $360 4 A. 88 8

Answer 1

Calculation of Bid Rent

Bid Rent for manufacturing land is calculated as follows:

Willingness to Pay for the Land / Production Site

And we know that Willingness to Pay for the Land is calculated as under:

Total Revenue - Non-Land Cost - Freight Cost

From the below table we can find the Bid Rent for the manufacturing land in question, as the Willingness to Pay for the Land is already given.

Willingness to Pay	Production Site (Acres)	Bid Rent ($/Acres)
$ 400	4	(400/4) = 100.00
$ 390	4	(390/4) = 97.50
$ 380	4	(380/4) = 95.00
$ 370	4	(370/4) = 92.50
$ 360	4	(360/4) = 90.00

So in the above table we can find the Bid Rent for the Land in dollars per acre. All the calculations are done according to the given instructions.