Question

Practice Sheet: Factory town Consider a shirt factory that produces shirts at a cost of $0.2. People around the factory can make shirts at a cost of $2. The cost of a round trip mile is $0.3. 1. Fill the table below Location of the Cost of a Cost of a The Cost of Im Shits household in homemade factory miles away from the factory household buys from shirt shirt 0 xi miles 1 2 away Short factory: $.2 Around factory: $2 Roundtrip it.3 3 4 S 6 8 2. What is the market area of the factory? Use a graph to show your answer. 3. If the transportation cost falls to $0.1 per round trip milc, how does this change affect the market area of the factory? How does this affect the size of the city? 4. If the cost of a shirt falls, how does this affect the size of the city?

Answer 1

А B A+B Here Market area of the factory is upto 6 miles, as after 6 miles cost of homemade shirt is lower than factory made shirt Location of the household in miles away Cost of a cost of a The from the homema factory Household factory de shirt shirt Buys from 0 2 0.2 Factory 1 2 0.5 Factory 2 2 0.8 Factory 3 2 1.1 Factory 2 1.4 Factory 5 2 1.7 Factory 6 2 2 Indifferent 7 2 2.3 Homemade 8 2 2.6 Homemade Factory Home Round Cost Factory made Trip Cost Mile Round Factory +Round Cost Cost Per Miles Trip Cost Cost trip Cost 0.2 2 0.3 0 0 0.2 0.2 0.2 2 0.3 1 0.3 0.2 0.5 0.2 2 0.3 2 0.6 0.2 0.8 0.2 2 0.3 3 0.9 0.2 1.1 4 0.2 2 eeeeeeeee 0.3 4 1.2 0.2 1.4 0.2 0.3 5 1.5 0.2 1.7 2 2 0.2 0.3 1.8 0.2 2 6 7 0.2 2 0.3 2.1 0.2 2.3 H 0.2 2 0.3 8 2.4 0.2 2.6 1 2 2 3 6 7 4 5 Miles

If transportation cost falls to $ 0.1 then following will be the case А B A+B Here Market area of the factory is upto 8 miles, as round trip cost has been fallen, and homemade shirt cost is higher than factory made shirt cost. Location of the household in miles away Cost of a cost of a The from the homema factory Household factory de shirt shirt Buys from 0 2 0.2 Factory 1 2 0.3 Factory 2 2 0.4 Factory 3 2 0.5 Factory 4 2 0.6 Factory 5 2 0.7 Factory 6 2 0.8 Factory 7 2 0.9 Factory 8 2 1 Factory Factory Home Round Cost Factory made Trip Cost Mile Round Factory +Round Cost Cost Per Miles Trip Cost Cost trip Cost 0.2 2. 0.1 0 0 0.2 0.2 0.2 2 0.1 1 0.1 0.2 0.3 0.2 2 0.1 2 0.2 0.2 0.4 0.2 2 0.1 3 0.3 0.2 0.5 0.2 2 0.1 4 0.4 0.2 0.6 0.2 2 0.1 5 0.5 0.2 0.7 0.2 2 0.1 6 0.6 0.2 0.8 0.2 2 0.1 7 0.7 0.2 0.9 0.2 2 0.1 8 0.8 0.2 1 + 1 2 3 4 5 6 7 8 Miles Activate Windows
4. If the cost of the shirt falls, this will affect the size of the city as, the factory cost of the shirt will be higher again, and homemade shirts will be cheaper, hence the factory area will be lesser, and more homemade shirts are produced.