Round-trip travel costs are 50 cents per mile, leading each store to have a market area with a ten-mile radius.
Round-trip travel costs are 50 cents per mile, leading each store to have a market area with a ten-mile radius. Now assume that Bob discovers a new way of marketing widgets that cuts his production cost (and store price) from $6 to $3. Tammy and Dick continue to sell widgets at $6. A. How does the decrease in production cost affect Bobs market area? B. What is the net price at the border between Bobs and Tammys market area? C. Will each household patronize the firm closest to its residence?
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