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Locations of Transfer-Oriented Firms Assume the distance between the resource (R ) and the market (M)...

Locations of Transfer-Oriented Firms
Assume the distance between the resource (R ) and the market (M) is 10 miles. A firm’s procurement cost is given by PC=0.5x^2, where x is the distance from the resource measured in miles. The firm’s distribution cost is given by
DC=100-0.5x. Again, x is the distance from the resource.

(a) What is the Total Freight Cost at each milestone (i.e., x=0, 1, 2, 3, ...10). Where should the firm locate?
(b) How does your answer to all parts under (a) change if the marginal procurement cost were equal to zero?

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