In Taiwan, no one goes to work, and everyone consumes a singlegood (food), which is imported from another place and can bepurchased (one meal at a time) from the nearest vending machine.Alternatively, food can be delivered by a distant catapult, capableof flinging a meal through a customer's window. The price of adelivered catapult meal is $8 and the price of a vending-machinemeal is $2. The travel cost for consumers is $1 per roundtrip mile($0.5 per mile traveled).
a. How many miles would the market area (i.e. maximum miles tobe traveled for vending) for the vending machine be?
b. Show your answer in a martini shaped glass, indicating theslope of the glass’ arms, price of food at vending machine, and theradius of the city. (Label your axes)
c. Now assume that everyone owns a bike, which reduces thetravel cost to $0.2 per round-trip mile. What would the new marketarea be for the vending machine?
d. Continue from part c above (everyone owns a bike still).Assume that a new vending machine replaces the old one, nowallowing customers to purchase 2 meals at a time (meals arestorable at no cost). How would that affect (if any) the marketarea of the vending machine?
e. Continue from part d above, and assume that everyone eats 2meals per day in this town, and a month is 30 days long. What wouldthe monthly rent difference be for a residence located 5 miles v.10 miles away from the vending machine? (Hint: a single daily tripto the vending machine is sufficient).
