Suppose That Firms Are Located in a Circle on an Island

question 22

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 transportation costs on the island rise,

• 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.