Suppose That Firms Are Located in a Circle on an Island

question 29

Multiple Choice

Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle) . As the number of customers increase,

• A)the number of firms will rise in the long run.
• B)the number of firms will fall in the long run.
• C)the number of firms will stay the same in the long run.
• D)It is impossible to tell from the information given

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Definitions:

Credit Terms

The conditions under which credit will be extended to a borrower, including the repayment schedule and interest rates.

Comparison Shopping

The practice of comparing prices and features of products or services to find the best deal or value before making a purchase.

Net

Typically refers to the amount remaining after certain deductions are made, such as net income or net profit.

Variable Cost

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor.