Business, 06.10.2019 05:30 tony7135

The steel factory makes steel from iron ore and coal. both iron and coal mines are near city a,,whichis100kilometersaway. thefactorymakes1tonof steel from 1 ton of coal and 2 tonnes of iron ore. shipping is costly and exhibits increasing returns to scale. shipping 1 ton of goods (either raw materials or ﬁnal products) incurs a terminal cost of $100 (the ﬁxed cost incurred as long as one needs to ship something, no matter how far it is shipped) and $10 per kilometer. a. is the production of steel weight-losing or weight-gaining? (5 pts) b. determine where the factory will be located in order to save as much as possible in shipping cost? suppose that if the factory is built in city a, it has immediate access to coal and iron ore, no shipping cost involving raw materials is required. if the factor is built in city b, it has immediate access to the market, no shipping cost involving the ﬁnal product is required. (10 pts)

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The steel factory makes steel from iron ore and coal. both iron and coal mines are near city a,,whic...

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