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Suppose that phones are manufactured using raw material steel that is available from a location called the "mine." Production of.5 ton of phones requires 1 ton of steel ores. X Enterprises, which has a contract to deliver 50 tons of phones to a location called the "market," is trying to decide where to locate its plant. The mine and the market are 250 miles apart. Overland shipment of phones costs $1 per ton per mile shipped, and steel costs $0.45 per ton per mile shipped, since they are on large industrial freighters. At the market, there is a train station downtown; at the mine, there is no train station. However, 10 miles from the mine, there is a regional train station. Because there is a daily service between the downtown station and the regional station, firms are allowed to ship their materials or products by train at the following rates: . Steel can be shipped by train at a rate of $1.5 per ton per mile, since they take up quite a lot of space, plus a $100 fee. Phones are smaller in size, and can be shipped by train at a rate of $.30 per ton per mile plus a $500 fee. a) Using the above information, find the transport-cost-minimizing location for X Enterprises AND the methods of transport for phones and for steel. The answer can be found by computing transport costs at all three locations: mine, market, and regional train station. Show your work. (6 pts) b) Illustrate your results in a diagram like the one attached Figure 51 A Resource-Oriented Firm at the Input Source m 50 Total transport cost Input transport cost 20 Output transport cost 10 0 10 x - Distance to output market 10 - x - Distance to input source c) Explain your results. d) Now, suppose that there was a change in contractors and the fee for shipping phones by train changes from 500 to 1000. Where is the cost-minimizing location for X Enterprises now? Show your work. e) In order to combat the negative externalities associated with train emissions, a carbon tax on train cargo has been proposed. Without any calculations, explain the effect of a unit carbon tax of $0.25|per ton on train freight on the cost-minimizing location of X Enterprises. (3 pts) Suppose that phones are manufactured using raw material steel that is available from a location called the "mine." Production of.5 ton of phones requires 1 ton of steel ores. X Enterprises, which has a contract to deliver 50 tons of phones to a location called the "market," is trying to decide where to locate its plant. The mine and the market are 250 miles apart. Overland shipment of phones costs $1 per ton per mile shipped, and steel costs $0.45 per ton per mile shipped, since they are on large industrial freighters. At the market, there is a train station downtown; at the mine, there is no train station. However, 10 miles from the mine, there is a regional train station. Because there is a daily service between the downtown station and the regional station, firms are allowed to ship their materials or products by train at the following rates: . Steel can be shipped by train at a rate of $1.5 per ton per mile, since they take up quite a lot of space, plus a $100 fee. Phones are smaller in size, and can be shipped by train at a rate of $.30 per ton per mile plus a $500 fee. a) Using the above information, find the transport-cost-minimizing location for X Enterprises AND the methods of transport for phones and for steel. The answer can be found by computing transport costs at all three locations: mine, market, and regional train station. Show your work. (6 pts) b) Illustrate your results in a diagram like the one attached Figure 51 A Resource-Oriented Firm at the Input Source m 50 Total transport cost Input transport cost 20 Output transport cost 10 0 10 x - Distance to output market 10 - x - Distance to input source c) Explain your results. d) Now, suppose that there was a change in contractors and the fee for shipping phones by train changes from 500 to 1000. Where is the cost-minimizing location for X Enterprises now? Show your work. e) In order to combat the negative externalities associated with train emissions, a carbon tax on train cargo has been proposed. Without any calculations, explain the effect of a unit carbon tax of $0.25|per ton on train freight on the cost-minimizing location of X Enterprises. (3 pts)

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