A Businessman Is Considering Opening a Small Specialized Trucking Firm

question 34

Short Answer

A businessman is considering opening a small specialized trucking firm. To make the firm profitable, it is estimated that it must have a daily trucking capacity of at least 84,000 cu. ft. Two types of trucks are appropriate for the specialized operation. Their characteristics and costs are summarized in the table below. Note that truck 2 requires 3 drivers for long haul trips. There are 41 potential drivers available and there are facilities for at most 40 trucks. The businessman's objective is to minimize the total cost outlay for trucks. $\begin{array}{cccc}&&\text { Capacity } &\text { Drivers }\\\text { Truck }&\text { Cost }& (\mathrm{Cu} . \mathrm{ft}) & \text { Needed } \\\hline \text { Small } & \$ 18,000 & 2,400 & 1 \\\text { Large } & \$ 45,000 & 6,000 & 3\end{array}$ Solve the problem graphically and note there are alternate optimal solutions. Which optimal solution:
a.uses only one type of truck?
b.utilizes the minimum total number of trucks?
c.uses the same number of small and large trucks?

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Definitions:

Domestic And Foreign Cars

Classifications of cars based on their country of origin; domestic cars are produced within one's own country, whereas foreign cars are imported.

Oligopoly

A market structure characterized by a small number of firms controlling the majority of market share, leading to limited competition.

Price Competition

A market strategy where businesses attempt to attract customers by undercutting competitors' prices.

Pure Competition

A market structure characterized by a large number of small firms, all producing homogeneous products, with no single company able to influence the market price.